The nature of the non accelerating inflation rate of unemployment is analysed. The focus of our analysis is the role of aggregate demand and capacity in the context of the NAIRU. Two aspects of the relationship between the level of aggregate demand and the NAIRU are of particular significance....

We propose a stochastic control model to study corporate investment with generalized investment frictions, including investment lags and various of adjustment costs. We find that the dominance of the ``good news principle'' or ``bad news principle'' is determined by the joint effect of...

In this paper we derive a model of aggregate investment that builds from the lumpy microeconomic behavior of firms facing stochastic fixed adjustment costs. Instead of the standard sharp (S,s) bands, firms' adjustment policies take the form of a probability of adjustment (adjustment hazard) that...

This paper analyzes the effects of changes in government expenditures on both a domestically produced and an imported good in an open economy based on intertemporal optimizing behavior. The dynamic adjustment is characterized in detail and the critical role played by the accumulating capital...

In a world of integrated capital markets, the price of credit — which I measure by short-term expected real interest rates — is determined to equate the world aggregate of investment demand to the world aggregate of desired national saving. I implement this approach empirically by...

Investment is often irreversible, in that installed capital has little or no value unless used in production. In the presence of ongoing uncertainty, an individual firm's irreversible investment policy optimally alternates short bursts of positive gross investment to periods of inaction, when...

Although large changes in real exchange rates have occurred during the past decades, the real implications of these movements remain an empirical question. Using detailed data from the United States, Canada, the United Kingdom, and Japan we examine the implications of exchange rates for time...

Aggregate investment and consumption have heterogeneous cyclical implications on firm-level earnings and the cyclical earnings patterns are associated with future abnormal returns. Earnings cyclicalities give rise to an information channel through which anticipated changes in investment and...

In this paper, I propose a method to disentangle the informational content of the average Tobin’s q by decomposing it into tangible q and intangible q. I argue that this decomposition increases the explanatory power of the q theory of investment by considering the different nature of corporate...

We derive from a model of investment with multiple capital goods a one-to-one relation between the growth rate of the capital aggregate and the stock market-based Q. We estimate the growth-Q relation using a panel of Japanese manufacturing firms taking into account the endogeneity of Q....

Most of the empirical work on investment is based on the existence of a relation between investment and the expected present val of marginal profits.Thus, in this paper we compute such a present value series, under various assumptions about demand and technology and examine its relation to...

We present a simple framework that incorporates a role for "interest rate spreads" in models of investment fluctuations. Formally, we develop a simple model of investment and financial contracting under asymmetric information that can he used to generate an Euler equation describing firms'...

A recent literature suggests that because investment expenditures are irreversible and can be delayed, they may be highly sensitive to uncertainty. We briefly summarize the theory, stressing its empirical implications. We then use cross-section and time-series data for a set of developing and...

The optimal timing of real investment is studied under the assumptions that investment is irreversible and that new information about returns is arriving over time. Investment should be undertaken in this case only when the costs of deferring the project exceed the expected value of information...

We study the effects of aggregate and idiosyncratic uncertainty on the entry of firms, total investment, and prices in a competitive industry with irreversible investment. We first use standard dynamic programming methods to determine firms' entry decisions, and we describe the resulting...

This paper presents a simple two-country model of the role of taxation in capital flows between developed countries ("The North") and developing countries ("The South"). The Southern country is assumed to be unable to enforce a tax on its residents' foreign-source income, and the Northern...

Our two related goals in this paper are the following: Firstly and mainly, we want to examine the effects of major changes in modelling strategy and econometric methodology, over the past twenty years, on estimation of firm-level investment equations using panel data. Secondly, we try to assess...

This paper revisits the canonical assumption of nonconvex capital adjustment costs in lumpy investment models as in Khan and Thomas (2008), which are assumed to follow a uniform distribution from zero to an upper bound, without distinguishing between the mean and the variance of the...

Capital market assumptions (CMAs), which are long-term risk and return forecasts for asset classes, are important pillars of the investment industry. However, applying them reliably in portfolio construction has been (and still is) a challenge in the industry. Despite the difficulties, this...

Suppose that a firm receives a cash windfall which does not change its investment opportunity set, or equivalently its marginal Tobin's Q. What will this firm do with the money? We provide empirical answers to this question using a sample of firms with such windfalls in the form of a won or...

The 90s have witnessed a revival in economists' interest and hope of explaining" aggregate and microeconomic investment behavior. New theories, better econometric" procedures, and more detailed panel data sets are behind this movement. Much of the progress" has occurred at the level of...

Much of James Tobin's professional life has been devoted to studying the interrelationship between the goods and financial markets. His general equilibrium approaches stresses the interaction of the demand for financial assets with the decision to accumulate productive capital. His emphasis on...

This paper surveys the neoclassical theory of aggregate investment and its criticisms. We identify four main strands in neoclassical investment theory: (i) the traditional Wicksellian model; (ii) the Fisherian "array-of-opportunities" approach; (iii) the Jorgensonian model; (iv) the now...

This research contributes to the theory of cost-reducing R&D investments by offering a tractable three-stage non-cooperative Cournot duopoly game in which R&D-investing firms choose whether to disclose R&D-related information to the rival. Though in a noncooperative context firms have no...

Recent research in macroeconomics has emphasized the importance of linking the financial and real sectors and the need for working with optimizing models. Tobinâ€TMs Q model of investment would appear to provide a framework that can satisfy these two criteria. In contrast to the original...

Macroeconomic and sector-specific shocks exert differential effects on investment in disaggregate sectoral data. The response to macroeconomic shocks is hump-shaped, just as in aggregate data. The effects of sectoral innovations decrease monotonically. A calibrated model of investment with...

This study attempts to asses firms' financial conditions to explain why they use myopic R&D cuts. Contrary to prior literature, this study shows that the current financial indicators of firms are also significant determinants of R&D myopic management along with stock market. Financial indicators...

Leading production-based asset pricing models predict that the sources of fluctuations in real investment and (scaled) stock prices are the same. Yet, extant empirical findings point to a large difference in these sources. We revisit this empirical question by deriving a present-value relation...

Macroeconomic and sector-specific shocks exert differential effects on investment in disaggregate sectoral data. The response to macroeconomic shocks is hump-shaped, just as in aggregate data. The effects of sectoral innovations decrease monotonically. A calibrated model of investment with...

This study provides a framework for consistent estimation of a dynamic dual model of investment for the case where data reveal zero and nonzero investments. The threshold model that is developed maintains that investments are zero if the shadow value of machinery is between a lower and an upper...

This paper examines the effects of international remittances on regional economic development using spatial data from an original household survey carried out in the Republic of Moldova. I analyze remittance flows with a model that estimates regional (urban and rural) budget shares of...

The paper builds up a macro function of investment to capture various key determinants and explore the intricate determination mechanism of aggregate investment. It explicates the basic trend determinant of investment, locates the cause of investment volatility and identifies the magnifier of...

Endowment funds and similar institutions aim to generate a benefit stream of unlimited duration on the basis of an initially donated capital. Towards this purpose, responsible trustees need to design a spending policy as well as an investment policy. A combined spending and investment policy is...

The paper concerns the study of equilibrium points, or steady states, of economic systems arising in modelling optimal investment with vintage capital, namely, systems where all key variables (capitals, investments, prices) are indexed not only by time τ but also by age s. Capital accumulation...