Under rational expectations, monetary policy is generally highly effective in stabilizing the economy. Aggregate demand management operates through the expectations hypothesis of the term structure: Anticipated movements in future short-term interest rates control current demand. This paper...

The paper develops a model of firm's investment under uncertainty with financial market imperfections and analyzes the effects of financial constraints on firm's investment. Firm's investment is an increasing function of the firm's marginal q, however the investment function is characterized by...

The paper develops a model of firmś investment under uncertainty with financial market imperfections and analyzes the effects of financial constraints on firmś investment. Firmś investment is an increasing function of the firmś marginal q, however the investment function is characterized by...