The I-r hump: irreversible investment under uncertainty

Author: C. Rose

Source: Oxford Economic Papers, Volume 52, Number 3, 1 July 2000 , pp. 626-636(11)

Buy & download fulltext article:

Price: $42.29 plus tax (Refund Policy)

Abstract:

t is well known that if investment is irreversible and uncertain, there exists a benefit to waiting. When such benefits are taken into account, the relationship between interest rates and investment may be quite complex. In particular, when net revenues follow a Gaussian random walk, model investment tends to zero at both high and low interest rates. That is, investment is a hump-shaped function of r.

Document Type: Original article

Affiliations: 1: Theoretical Research Institute, Bellevue Hill, Sydney, NSW 2023, Australia

Publication date: 2000-07-01

More about this publication?

Oxford Economic Papers is a general economics journal, publishing refereed papers in economic theory, applied economics, econometrics, economic development, economic history, and the history of economic thought. It occasionally publishes survey articles in addition to original papers. Books are not reviewed, but substantial review articles are considered. The journal occasionally publishes survey articles in addition to original papers, and occasionally publishes special issues or symposia.