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 an upper bound that depends on the firm's borrowing capabilities. The firm …

independently decide on their investment into different locations (countries). We show that, in the presence financial frictions …, firms' real investment choices become strategic complements, leading to multiple, self-fulfilling equilibria. This fragility … over to countries connected to them by real investment linkages. We show that such global crashes are particularly severe …