We study the effects of aggregate and idiosyncratic uncertainty on the entry of firms, total investment, and prices in … a competitive industry with irreversible investment. We first use standard dynamic programming methods to determine …

Most of the empirical work on investment is based on the existence of a relation between investment and the expected … demand and technology and examine its relation to investment.We find that variations in this present value series are … value series, although significantly related to investment, still leaves unexplained a large, serially correlated fraction …

In this paper we derive a model of aggregate investment that builds from the lumpy microeconomic behavior of firms …-of-sample criteria, we find that the model performs substantially better than the standard linear models of investment for postwar … sectoral U.S. manufacturing equipment and structures investment data …

The 90s have witnessed a revival in economists' interest and hope of explaining" aggregate and microeconomic investment … of the investment problem also has been significant. " The concept of sunk costs is at the center of modern theories. The … implications of these costs for" investment go well beyond the neoclassical response to the irreversible-technological friction …

In this paper we derive a model of aggregate investment that builds from the lumpy microeconomic behavior of firms … aggregate investment obtained from adding up the actions of firms subject to aggregate and idiosyncratic shocks, is highly non … postwar sectoral U.S. manufacturing equipment and structures investment. For a given sequence of aggregate shocks, the …

Investment is often irreversible, in that installed capital has little or no value unless used in production. In the … presence of ongoing uncertainty, an individual firm's irreversible investment policy optimally alternates short bursts of … positive gross investment to periods of inaction, when the installed capital stock is allowed to depreciate. The behavior of …

This paper presents an overview of current models of consumption and investment behavior. First, the stochastic … critical discussion of the Ricardia Equivalence Theorem. Investment behavior is analyzed using a dynamic optimization model of … theory. The model is then used to analyze the interaction of corporate taxes, inflation and investment and also to analyze …

When investment decisions cannot be reversed and returns to capital are uncertain, the firm faces a higher user cost of …. This effect tends to increase the firm's capital stock. We show that a firm with irreversible investment may have a higher … investment. Furthermore, an increase in uncertainty can either increase or decrease the expected long-run capital stock under …

Investment is characterized by costly reversibility when a firm can purchase capital at a given price and sell capital … at a lower price. We derive an explicit analytic solution for optimal investment by a firm facing costly reversibility … problem on the triggers for investment. More generally, we extend the Jorgensonian concept of the user cost of capital to the …