Fixed Capital Adjustment: Is Latin America Different? Evidence from the Colombian and Mexican Manufacturing Sectors

April 1, 1999

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Gaston Gelos, and Alberto Isgut. Fixed Capital Adjustment: Is Latin America Different? Evidence from the Colombian and Mexican Manufacturing Sectors, (USA: International Monetary Fund, 1999) accessed September 18, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines capital adjustment patterns using two large and largely novel data sets from the manufacturing sectors of Colombia and Mexico. The findings show that investment patterns in these countries resemble those reported for the United States to a surprising extent. Capital adjustments beyond maintenance investment occur only rarely, but large spikes account for a significant fraction of total investment. Although duration models do not provide strong evidence for the presence of substantial fixed costs, nonparametric adjustment function estimates reveal the presence of irreversibilities in investment. These irreversibilities are important for understanding aggregate investment behavior.

Subject: Econometric analysis, Economic sectors, Financial institutions, Logit models, Manufacturing, Prices, Producer price indexes, Production, Productivity, Stocks

Keywords: Capital stock, Equipment investment, Hazard function, Investment, Investment episode, Investment rate, Investment spike, Irreversibilities, Logit models, Lumpiness, Manufacturing, Nonconvexities, Panel data, Producer price indexes, Productivity, Stocks, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/059
Stock No:

WPIEA0591999
ISBN:

9781451847925
ISSN:

1018-5941

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