Investment adjustment costs in annual frequency

Good afternoon,

The standard value of capital investment adjustment cost is near 6. This value is obtained from quarterly data. I would like to know if I have to multiply by 4 this cost in an annual frequency model?

Plus, do you have references on durables investment adjustment costs ? I cannot find any.

Thank you.

Best regards

  1. Which type of investment adjustment costs do you have in mind?
  2. Mertens/Ravn (2011) have durables adjustment costs

1- I have quadratic convex investment adjustment costs for physical capital and durable goods.
2- The adjustment costs are on the durable stock in the reference, not the durable investments.

Thank you @jpfeifer

Best regards

Dear @jpfeifer,

I’m getting back at you on that matter. In order to obtain an adjustment cost in annual frequency, Should I multiply by 4 (4 quarters) an adjustment cost estimated on quarterly data?

Thanks

No, usually you have to divide by four, because the same amount of investment is now spread out over four times as much time.

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Thank you @jpfeifer. So if I find an adjust cost parameter in quarterly data of 10.8, that parameter becomes 2.7 on annual frequency ? Just to make sure, because I mentioned in the previous post adjustment costs instead of “adjustment cost parameter”.

Thanks

Yes, according to my experience, this yields similar dynamics in annual values.

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