This paper presents a simple model with financial frictions where inflation increases the cost faced by firms holding liquid assets to hedge risky production against expenditure shocks. Inflation tilts firms' technology choice away from innovative activities and toward safer but return-dominated...

This paper presents a simple model with financial frictions where inflation increases the cost faced by firms holding liquid assets to hedge risky production against expenditure shocks. Inflation tilts firms' technology choice away from innovative activities and toward safer but return-dominated...

Investment decision-making is modeled by means of a Kohonen neural net, whose neurons represent firms as decision-makers. Thus, the network reconstructs collective decision-making by the productive system. This model focuses on the decision to invest in novel fields of activity, which requires...