Understanding Investment Irreversibility in General Equilibrium
نویسندگان
چکیده
منابع مشابه
Understanding Investment Irreversibility in General Equilibrium
In general equilibrium, irreversibility a ects both the wealth of consumers and the return on assets. As long as the inter-temporal elasticity of substitution is realistically low, irreversibility not only prevents capital destruction, but it also induces capital creation. Furthermore, under certain conditions, irreversibility raises the risk premium by increasing the variability of consumption...
متن کاملLumpy Investment and State-dependent Pricing in General Equilibrium Lumpy Investment and State-dependent Pricing in General Equilibrium
What are the aggregate consequences of microeconomic lumpy decisions? This is by now a classical question. Most existing general equilibrium analyses focus, however, on one single decision at a time. In the present paper we analyze simultaneous (S,s) pricing and investment decisions. Surprisingly, equilibrium dynamics are similar to what they would be in the absence of restrictions on price or ...
متن کاملInvestment, Irreversibility, and Financial Imperfections¤
Research ...nds that ...rms’ investment decisions are distorted by irreversibility and ...nance constraints. Whereas the existing literature examines the e¤ects of these features separately, this paper studies their interaction. The impact of these constraints on a ...rm’s incentive to invest is characterised using option pricing techniques. Financial constraints reduce the initial capacity, ra...
متن کاملLUMPY INVESTMENT IN DYNAMIC GENERAL EQUILIBRIUM Ruediger Bachmann
Microeconomic lumpiness matters for macroeconomics. According to our DSGE model, it explains roughly 60% of the smoothing in the investment response to aggregate shocks. The remaining 40% is explained by general equilibrium forces. The central role played by micro frictions for aggregate dynamics results in important history dependence in business cycles. In particular, booms feed into themselv...
متن کاملInterest Rates, Irreversibility, and Backward-Bending Investment
This paper studies the effect of interest rates on investment in an environment where firms make irreversible investments with uncertain pay-offs. In this setting, changes in the interest rate affect both the cost of capital and the cost of delaying investment to acquire information. These two forces combine to generate an aggregate investment demand curve that is a backward-bending function of...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Economic Inquiry
سال: 2001
ISSN: 0095-2583,1465-7295
DOI: 10.1093/ei/39.4.499