Hanbaek Lee

Job Market Paper

Striking While the Iron Is Cold: Fragility after a Surge of Lumpy Investments

In this paper I argue that synchronized large-scale investments of large firms can significantly amplify productivity-driven aggregate fluctuations, and lead to investment cycles even in the absence of aggregate shocks. Using U.S. Compustat data, I show that years preceding recessions display investment surges among large firms. Furthermore, after the investment surges, large firms become inelastic to interest rates and display persistent inaction duration. I then develop a heterogeneous-firm real business cycle model in which a firm needs to process multiple investment stages for large investments and can accelerate it at a cost. In the model, following a TFP shock the synchronized timings of lumpy investments are persistently synchronized. And TFP-induced recessions are especially severe after the surge of large firms’ lumpy investments. In support of this prediction, I present evidence for the investment cycle in post-shock period in macro-level data on nonresidential fixed investment.

Download Paper


Macroeconomics, Finance



Download CV


Jesus Fernandez-Villaverde

Dirk Krueger


Frank Schorfheide

Andrew Abel

Job Market Candidate Status
I am a PhD candidate in Economics at the University of Pennsylvania. I am on the 2020/2021 Job Market and will be available for interviews.