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Mr. Arne L Bigsten
This paper examines dynamic patterns of investment in Cameroon, Ghana, Kenya, Zambia and Zimbabwe, assessing the consistency of those patterns with different adjustment cost structures. Using survey data on manufactured firms, we document the importance of zero investment episodes and lumpy investment. The proportion of firms experiencing large investment spikes is significant in explaining aggregate manufacturing investment. Taken together, evidence from descriptive statistics, average investment regressions modeling the response to capital imbalance, and transition data analysis indicate that irreversibility is an important factor considered by firms when making investment plans. The picture is not unanimous however, and some explanations for the mixed results are proposed.
Mr. R. G Gelos and Mr. Alberto Isgut

Front Matter Page Research Department Authorized for distribution by Eduardo Borensztein Contents I. Introduction II. Data III. The Distribution of Investment Rates and the Importance of Investment Spikes IV. The Shape of the Hazard V. The Average Adjustment Function VI. Conclusion Text Tables: 1. Distribution of Total Mean Employment in Samples 2. Mexico: Distribution of Fixed Gross Investment Rates and Share in Total Investment 3. Colombia: Distribution of Fixed Gross Investment Rates and Share in Total Investment (Unbalanced

Mr. R. G Gelos and Mr. Alberto Isgut

presence of indivisibilities, irreversibilities, and/or non-convexities in the adjustment cost function may lead to optimal microeconomic investment paths characterized by infrequent episodes of large capital adjustments (investment spikes) surrounded by long periods of inaction. If the investment spikes of different firms are not perfectly synchronized, aggregate investment behavior cannot be modeled by the use of a representative firm. Under such circumstances, knowledge about the mean gap between target and actual capital stocks would be insufficient to make

Mr. R. G Gelos and Mr. Alberto Isgut
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.
Mr. Arne L Bigsten

investment activity is concentrated in intermittent periods of large expenditures for the firms in our sample. Second, at the country level, we analyze the relationship between the frequency of firms undergoing investment spikes and aggregate manufacturing investment (proxied by the total investment of firms in our country sample), in order to demonstrate the potential aggregate significance of accounting for lumpy investment. In the third and fourth step, we explore capital adjustment patterns along two dimensions: following Caballero and Engel (1994) , we analyze how

Ms. Anna Ilyina and Roberto M. Samaniego
The benefits from financial development are known to vary across industries. However, no systematic effort has been made to determine the technological characteristics that are shared by industries that tend to grow relatively faster in more financially developed countries. This paper explores a range of technological characteristics that might underpin differences across industries in the need or the ability to raise external funding. The main finding is that industries that grow faster in more financially developed countries tend to display greater R&D intensity or investment lumpiness, indicating that well-functioning financial markets direct resources towards industries that grow by performing R&D.
Ms. Anna Ilyina and Roberto M. Samaniego

R&D (RND) - R&D spending as a fraction of capital expenditures ↓ - lower alienability, lower tangibility ↑ - longer gestation period, high startup costs, shorter harvest periods Investment lumpiness (LMP) - average number of investment spikes. ↓ - lower alienability ↑ - higher adjustment costs LABOR Labor intensity (LAB) - a fraction of value added ↓ - lower alienability, lower tangibility ↓ - lower need for follow-up investment Human capital (HC) - average wage ↓ - lower alienability, lower

International Monetary Fund. Middle East and Central Asia Dept.

investment accounts for 50 percent of total investment expenditure. 7 Absorptive capacity constraints start binding when public investment rises above 75 percent from its initial value. The calibration of the model implies that the average investment efficiency approximately halves when public investment spikes to around 200 percent from its initial value. 8 These series exclude the debt owed by Mauritania to the Kuwaiti Investment Authority (KIA) from which the country is seeking debt relief.

M. Chatib Basri

. When external shocks occur, as during the TT in 2013 or fears over the Fed’s rate hikes in 2015, capital outflows from portfolio investment spike and the rupiah weakens significantly. To address the issue of capital flow volatility, Indonesia should continue to use fiscal, monetary, and macroprudential instruments. If the current account deficit is financed by FDI, particularly for export-oriented sectors, the risk of capital flow volatility is relatively small. To stimulate economic growth while maintaining macroeconomic stability, efficiency and productivity must

Mr. Giovanni Melina and Marika Santoro

in all sectors, GDP declines about 1.2 percent in the case of adaptation infrastructure capital and about 3 percent in case of standard infrastructure. Consumption and private investment both fall initially by about 15 percent while public investment spikes up to replace the lost capital, driving the recovery. In the aggregates, total investment falls only marginally on impact as public effort steps up. The model captures the complementarities between standard and adaptation infrastructure, as public investment in standard capital can be partly intertwined with