We develop a simple theoretical model of investment under the assumption that financial frictions generate adjustment … investment of non-financial corporations. We find that a strong relationship holds between financial flows and investment. Shocks … to investment have a persistent impact on external finance, whereas the impact on investment of external finance shocks …

We develop and characterize analytically an investment model in discrete time with a fixed adjustment cost not … proportional to existing capital and complete irreversibility that reproduces the lumpiness of investment at the micro-level. In … agreement with the empirical evidence, as a firm size increases, investment becomes less lumpy. The optimal policy is of the …

of firm investment and demand for labor with imperfect capital markets, represented as a constraint on dividends, and … firm investment, which does not happen if only labor market rigidities are removed. …

with the observed investment patterns among manufacturing firms in five African countries. We document a high frequency of … zero investment episodes, which is consistent with both fixed adjustment costs and irreversibility and inconsistent with … irreversibility and not fixed costs. We finally model the investment rate as a function of the size of the capital disequilibrium. The …