This paper investigates the role of financial buffer stocks in company sector decisions. A stylized.analytic model is used to consider how adjustment costs in changing dividends can generate a role for a financial buffer stock in any expenditure decision by the firm which has a influence beyond...

Conventional wisdom has it that increasing price or exchange rate uncertainty will depress investment. Using the Dixit-Pindyck model, we find that there are situations where this does happen; and situations where it does not – i.e. increasing uncertainty leads to more investment. It depends...