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before Feb 15
Julieta Caunedo and I are the Program Chairs
Tom Sargent honoris causa at di Tella University in Buenos Aires.
#econsky I'm thrilled to announce I'm moving to Paris!🇫🇷
I've accepted an offer to join @insead.bsky.social as an Assistant Professor of Finance
I'm so grateful to my advisors, friends, and family who helped me navigate challenging times. So excited to join a wonderful group!
Twitter is now full of rightwing nuts and EJMR mentions. I know it was going down hill but this is probably the last straw.
Twitter really has gone down in quality quite a bit… please don’t stop the memes, we need some laughs during these times!
#econsky 📉📈
Please help me share my JMP titled
* The Firm Life Cycle Origins of the Aggregate Investment Puzzle *
🧵 above + abstract + link to paper website here:
sites.harvard.edu/martin-arago...
let me end JMP 🧵 w/ optimistic note
Since 2010 US Census shows startup resurgence!
Even accelerated thru COVID!!
Why? Has startup deficit ended? I'm investigating this...
JMP shows startup surging across OECD countries
along with investment / profits like in my model
JMP 🧵 9/ In many models profitable firms invest more
In life cycle models, startups shifts GDP
from YOUNG firms front-loading investment to grow
to OLD firms back-loading profits rewarding past investment
Generating ⬆️ profits ⬇️ investment in macro data!
JMP 🧵 8/ S&D economics
I solved the life cycle investment model in closed-form!
startup rates shifted *both* supply & demand
S: yes, r* should have stimulated I/Y but...
D: firm aging depressed investment demand even more
=> "unintuitive" r & I/Y covariance
JMP 🧵 7/ fewer startups => lower rates r*
Why did interest rates not stimulate investment?
Because startup rate had 2 effects
PE: Firm aging, depressing investment I/Y
GE: Slower consumption growth, depressing r*
Model fits data best when firms are insensitive to r*
JMP 🧵 6/ life cycle origins of the investment puzzle
Since 80s startup activity collapsed...
firms got older!
Investment declined despite rising profits in macro data
Why didn't profitability stimulate investment?
Life cycle economics:
Higher profits reward past investment!
JMP 🧵 5/ life cycle origins of investment
I find the investment puzzle is actually not so puzzling...
once the model experiences historical startup rates!
From WWII to mid-70s: Startup rate
Peak ~Microsoft/Apple launched
firms turned younger!
and investment/GDP boomed!
JMP 🧵 4/ neoclassical theory of the investment puzzle
I add investment to my favorite model (Hopenhayn '92)
+ force it to match US Census firm life cycle dynamics!
How?
I propose a calibration method I found useful:
Matching the terms in the formula I used for empirics!
JMP 🧵 3/ missing investment boom
Literature tried to come up with "micro" reasons why firms invest less
But...
Census shows firm-level investment given age boomed!
Do you think business/VC world think investment fell? No
Firm aging likely made macro fall despite micro boom
JMP 🧵 2/ firm aging depressed macro investment!
Firm aging predicts puzzling Investment/GDP decline
Why? Confidential Census micro data shows:
A. economy has shifted from young to old firms
B. older firms invest less intensely, but more profitable?
I build a formula with A + B
JMP 🧵1/ startups matter for macro!
I spent years fascinated by a missing investment puzzle: Why did macro investment ⬇️ if profitability ⬆️?
I found firms' investment boomed! Boom missing in macro data because:
⬇️startup rate
⬆️firm age
#econsky 📉📈 please share: sites.harvard.edu/martin-arago...
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Hi #econsky first post here! I’m a Harvard job market candidate working on macro with firm dynamics