Investment, irreversibility and financial imperfections: the rush to invest and the option to wait

The impact of combinations of frictions on investment activity is poorly understood. We develop a model of investment under financial frictions and irreversibility. We show that the possibility of encountering financial constraints in future raises irreversible investment today over that arising under irreversibility alone. By contrast, investment under both frictions is lower than under future financial constraints alone.

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Year of publication:	2007-05-02
Authors:	Holt, Richard
Published in:	Economics Bulletin. - AccessEcon, ISSN 1545-2921. - Vol. 5.2007, 10, p. 1-10
Publisher:	AccessEcon

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Extent:	application/pdf
Type of publication:	Article
Classification:	E2 - Consumption, Saving, Production, Employment, and Investment ; D9 - Intertemporal Choice and Growth
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010629924