The E¤ects of Adjustment Costs and Uncertainty on Investment Dynamics and Capital Accumulation
نویسنده
چکیده
This paper provides a uni ed framework to study how capital adjustment costs and uncertainty a¤ect investment dynamics and capital accumulation. It considers an ongoing rm with stochastic downward sloping demand curve and facing three possible forms of adjustment costs: complete or partial irreversibility, xed costs of undertaking any investment and the traditional quadratic adjustment costs. The quantities of interest are the impact e¤ects of demand shocks on capital adjustment in the short run, and the expected capital stock level in the long run, under di¤erent forms of adjustment costs, and at di¤erent levels of uncertainty. JEL Classi cation: E22, D92, C61
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