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Richard Holt
''Investment, irreversibility and financial imperfections: the rush to invest and the option to wait''
( 2007, Vol. 5 No.10 )
The impact of combinations of frictions on investment activity is poorly understood. We develop a model of investment under financial frictions and irreversibility. We show that the possibility of encountering financial constraints in future raises irreversible investment today over that arising under irreversibility alone. By contrast, investment under both frictions is lower than under future financial constraints alone.
JEL: E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
D9 - Intertemporal Choice and Growth: General
Manuscript Received : Apr 28 2007 Manuscript Accepted : May 02 2007

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