This paper studies the aggregate implications of microeconomic investment irreversibility and idiosyncratic uncertainty in a simple growth model by highlighting real option effects. We endogenize the drift rate of real option by connecting it to the state of the economy. Thereby, we extend the...

The more a country saves, the less it invests as a share of saving. We build a “store-or-sow” model of growth with precautionary saving and investment to study the nonlinear relationship between investment and saving. We contend that income volatility is an important variable for explaining...

We study the effects of permanent and temporary income shocks on precautionary saving and investment in a "store-or-sow" model of growth. High volatility of permanent shocks results in high precautionary saving in the safe asset and low investment, or a "volatility trap." Namely, big savers...

The worst of the ailments distressing the economy of Zimbabwe continue to be sycophantically dubious and characteristically dystopian policies that are still causing malicious effects on private investment and yet private investment is an indisputably powerful means for sustainable economic...

Using the dataset that comprises annual data during 1979 and 2012 and obtained from various sources, this study examines the importance of capital formation to Thai economy and what driving forces influence capital formation. The results show that real GDP and capital formation are cointegrated,...

We examine the relationship between real exchange rate depreciations and indicators of firm performance using data for a sample of more than 30,000 firms from 66 (advanced and emerging market) countries over the 2000-2011 period. We show that depreciations boost profits, investment, and sales of...

We quantify the impact of barriers to international investment, using a novel multi-country dynamic general equilibrium model with heterogeneous investors and imperfect capital mobility. Our model yields a gravity equation for bilateral foreign asset positions. We estimate this gravity equation...

Hülsmann (2008) argues that the neglect of time preference changes on the demand side of the time market renders Rothbard's (1993) analysis incomplete in that it unduly portrays a rise in the volume of investment as a necessary counterpart to a fall in the pure interest rate. Focusing on the...

Liquidity creation (the transformation of liquid liabilities into illiquid assets) by banks is positively associated with economic growth at both country and industry levels. Liquidity creation boosts tangible, but not intangible investment and does not contribute to growth in countries with a...

We present evidence that an increase in investment as a share of GDP predicts a higher growth rate of output per worker, not only temporarily, but also in the steady state. These results are found using pooled annual data for a large panel of countries, using pooled data for non-overlapping...