Pursuing the wrong options? Adjustment costs and the relationship between uncertainty and capital accumulation

Bond, Stephen, Soderbom, Mans and Wu, Guiying (2011) Pursuing the wrong options? Adjustment costs and the relationship between uncertainty and capital accumulation. Economics Letters, 111 (3). pp. 249-251.

Abstract

Abel and Eberly (1999) prove that uncertainty has an ambiguous effect on long run capital accumulation in a real options model. We show that, with adjustment costs quadratic in investment, more uncertainty reduces capital and this effect may be large.

Item Type: Article
Keywords: Stabilization; Income insurance; Liquidity constraints; Fiscal stimulus
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 28 May 2012 11:48
Last Modified: 23 Oct 2015 14:07
URI: http://eureka.sbs.ox.ac.uk/id/eprint/3420

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