This paper shows that with (partial) irreversibility higher uncertainty reduces the responsiveness of investment to demand shocks. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix of...

This paper shows that with (partial) irreversibility higher uncertainty reduces the "responsiveness "of investment to demand shocks. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix...

In this paper, the authors investigate the sensitivity of investment to the availability of internal funds using the hierarchy of finance approach to corporate finance. They characterize the empirical implications of this approach for dynamic investment models and test these implications using...

This paper presents specification tests that are applicable after estimating a dynamic model from panel data by the generalized method of moments, and studies the practical performance of these procedures using both generated and real data. The authors' generalized method of moments estimator...