Bt Matthias Meier
We provide new evidence that (i) time to build is volatile and countercyclical, and that (ii) supply chain disruptions lengthen time to build. Motivated by these findings, we develop a general equilibrium model in which heterogeneous firms face non-convex adjustment costs and multi-period time to build. In the model, supply chain disruptions lengthen time to build. Calibrating the model to US micro data, we show that disruptions, which lengthen time to build by 1 month, depress GDP by 1% and aggregate TFP by 0.2%. Structural vector autoregressions corroborate the quantitative importance of supply chain disruptions.
A timely study of supply chain disruptions, within business cycles, though. I doubt that if the current disruption due to Covid-19 last a couple of months, the impact on output will be just a couple of percents. Business cycle models approximated around their steady-state show their limitations in that case. But I wonder what lessons for today we could still draw form this model.