Ever since the start of the Industrial Revolution in Britain in the 1760s, innovation and investment have been crucial elements in economic explanations of the dynamics of capitalism. Classical economics recognises that innovation embodied in the form of new machines through fixed capital investment is the essential process for realising economic development. This study sets up a theoretical li...

In this paper, we describe a framework for modeling investment in restructured electricity markets. This framework is extremely flexible, and is designed to be able to capture many of the key considerations that distinguish investment in deregulated electricity markets from both investment in regulated markets, and investment in competitive markets for other commodities. The model is composed o...

The paper investigates the impact on credit risk of capital structure choices driven by firm’s investments and financing decisions. We propose a realistic dynamic structural model featuring endogenous investment, capital structure and default. We calibrate the model on accounting and market data. Using simulation, we find that, credit spreads as well as other standard metrics of credit worthine...

1. Ryoo and Rosen’s (2004) partial equilibrium model of the market for engineers; 2. Rosen, Murphy, and Scheinkman’s (1994) model of cattle cycles; 3. Lucas’s (1978) model of asset prices; 4. Brock and Mirman’s (1972) and Hall’s (1978) model of the permanent income theory of consumption; 5. Time-to-build models of business cycles; 6. Siow’s (1984) model of occupational choice; 7. Topel and Rose...

We examine the choice between Foreign Direct Investment and Foreign Portfolio Investment at the level of the source country. Based on a theoretical model, we predict that (1) source countries with higher probability of aggregate liquidity crises export relatively more FPI than FDI, and (2) this effect strengthens as the source country’s capital market transparency worsens. To test these hypothe...

We analyze the evolution of economic institutions during the process of industrialization. In particular, we focus on the institution of contract enforcement. Empirically, we show that, during the process of industrialization, countries tend to shift their manufacturing production towards industries that require more relationship-specific investment. Theoretically, we build a dynamic model with...

This paper describes an expert system (ES) based decision support system (DSS), which aids the user to select feasible projects among a strategic portfolio supplied by a dynamic simulator (DS). The ES incorporates the ALTMAN model for predicting financial distress. This model is utilized for aiding the user to find the most feasible values for the financialeconomic parameters, managing the proj...

The holdup problem arises when parties negotiate to divide the surplus generated by their relationship specific investments. We study this problem in a dynamic model of bargaining and investment which, unlike the stylized static model, allows the parties to continue to invest until they agree on the terms of trade. The investment dynamics overturns the conventional wisdom dramatically. First, t...