The real options tradition originally predicted a decreasing relationship between uncertainty and investment, through the positive effect of higher uncertainty on the trigger level for revenue relative to costs. An opposing effect on the probability of reaching the level has been identified,...

This paper describes an equilibrium life-cycle model of housing where nonconvex adjustment costs lead households to adjust their housing choice infrequently and by large amounts when they do so. In the cross-sectional dimension, the model matches the wealth distribution; the age profiles of...

Building on recent developments in behavioral asset pricing, we develop a model in which an increase in the dispersion of investor beliefs under short-selling constraints predicts a bubble, or a rise in a stock's price above its fundamental value. Our model predicts that managers respond to...

Tässä raportissa tarkastellaan aineettomien investointien eriä Tilastokeskuksen mikroaineistoilla. Jo yritystasolla aineettomat investoinnit ovat suurempia kuin aineelliset ja niiden huomioiminen muuttaa käsityksiämme monista perussuureista: esimerkiksi yrityssektorin arvonlisäyksen taso...

In this paper we consider the entry and exit of firms in a Ramsey model with capital and an endogenous labour supply. At the firm level, there is a fixed cost combined with increasing marginal cost, which gives a standard U-shaped cost curve with optimal firm size. The costs of entry (exit) are...

In this paper we investigate how demand and output price uncertainty affect investment plans of Belgian manufacturing firms. We obtain time-varying uncertainty measures at the firm and industry level from the Belgian monthly business cycle survey and investment plans from the half-yearly...

We investigate the cost of capital in a model with an agency conflict between inside managers and outside shareholders. Inside ownership reflects the classic tradeoff between incentives and risk diversification, and the severity of agency costs depends on a parameter representing investor...

Due to adjustment costs, firms' only partially adjust toward desired investment levels. By exploiting unique survey data on firms' desired investments, we examine how and when firms adjust their investments toward stated plans (targets). More precisely, we examine how financing costs due to...

This paper represents a first attempt at a tractable analysis of how monetary policy influences the income distribution in an economy. It presents a monetary growth model in which inflation affects credit market efficiency, and via this link, influences capital accumulation, and the income...

Investment in physical capital at the micro level is infrequent and large, or lumpy. The most common explanation for this is that firms face non-convex physical adjustment costs. The model developed in this paper shows that information costs make investment lumpy at the micro level, even in the...