discount rates and thereby raise real investment. We analyze the macroeconomic implications of sticky discount rates using a … New Keynesian model. The model naturally generates investment-consumption comovement in response to household demand … shocks and higher investment in response to government spending. Sticky discount rates imply that inflation has real effects …

We study the role of financial frictions in determining the allocation of investment and innovation. Empirically, we … find that firms are investment-intensive when they have low net worth but become innovation-intensive as they accumulate … frictions. In our model, low net worth firms are investment-intensive because their returns to capital are high. Financial …

creates a lemons problem in the market for external finance, depressing investment relative to the full information benchmark … private information accounts for 40% of the decline in aggregate investment during the 2007-2009 financial crisis and made …

, scope, and investment decisions, and we outline their connection to recent macroeconomic and financial trends in the US …