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The Macroeconomics of Irreversibility

Isaac Baley & Andrés Blanco

The Review of Economic Studies2026https://doi.org/10.1093/restud/rdag001article
FT50AJG 4*ABDC A*
Weight
0.50

Abstract

We study aggregate capital dynamics in an investment model with idiosyncratic productivity shocks, fixed capital adjustment costs, and irreversibility driven by a wedge between capital purchase and resale prices. We derive sufficient statistics that capture the role of investment frictions in aggregate capital fluctuations, measure these statistics using investment microdata, and exploit them to discipline the capital price wedge. Irreversibility doubles the persistence of capital fluctuations and is crucial for reconciling micro-level investment behaviour with macroeconomic propagation.

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https://doi.org/https://doi.org/10.1093/restud/rdag001

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@article{isaac2026,
  title        = {{The Macroeconomics of Irreversibility}},
  author       = {Isaac Baley & Andrés Blanco},
  journal      = {The Review of Economic Studies},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1093/restud/rdag001},
}

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The Macroeconomics of Irreversibility

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

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