Time-to-build and investment

The paper investigates the effect of the time-to-build technology on invest ment dynamics. It explains the positive autocorrelation of investment by sh owing that investment is serially correlated once the time-to-build technol ogy is taken into account. The paper also shows that the time-to-build tech nology can explain a substantial portion of the variation in aggregate inve stment data. Using estimated marginal Q, the paper illustrates that investm ent responds asymmetrically to different levels of Q (a fact in favor of th e irreversibility argument).