Irreversibility, Uncertainty, and Cyclical Investment

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ID: 289795
1983
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Abstract
This paper builds on the theory of irreversible choice under uncertainty to give an explanation of cyclical investment fluctuations. The key observation is that, when individual projects are irreversible, agents must make investment timing decisions that trade off the extra returns from early commitment against the benefits of increased information gained by waiting. In an environment in which the underlying stochastic structure is itself subject to random change, events whose long-run implications are uncertain can create an investment cycle by temporarily increasing the returns to waiting for information.
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openalex_W3125975571 Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors Ben Bernanke
Journal the quarterly journal of economics
Year 1983
DOI
10.2307/1885568
URL
Keywords Keywords not found

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