Over the past decade, a number of researchers have extended conventional models of business fixed investment to … incorporate a role for financial constraints' in determining investment. This paper reviews developments and challenges in this … challenges. First, I describe analytical underpinnings of models of capital-market imperfections in the investment process, and …

Unlike the prediction of a frictionless open economy model, long-term average savings and investment rates are highly … that the calibrated model with both frictions produces a savings-investment correlation and a volume of capital flows close …