  Is the typical specification of the Euler equation for investment employed in
DSGE models consistent with aggregate macro data? Using state-of-the-art
econometric methods that are robust to weak instruments and exploit information
in possible structural changes, the answer is yes. Unfortunately, however,
there is very little information about the values of these parameters in
aggregate data because investment is unresponsive to changes in capital
utilization and the real interest rate. In DSGE models, the investment
adjustment cost and the persistence of the investment-specific technology shock
parameters are mainly identified by, respectively, the cross-equation
restrictions and the dynamics implied by the structure of the model.
