Irreversibility and the explanation of investment behavior
The explanation of aggregate and sectoral investment behavior has been one of the less successful endeavors in empirical economics. Existing econometric models have had little success in explaining or predicting investment spending. This may be because most such models fail to account for the irreve...
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| Format: | Working Paper |
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MIT Center for Energy and Environmental Policy Research
2009
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| _version_ | 1826207242580393984 |
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| author | Pindyck, Robert S. |
| author_facet | Pindyck, Robert S. |
| author_sort | Pindyck, Robert S. |
| collection | MIT |
| description | The explanation of aggregate and sectoral investment behavior has been one of the less successful endeavors in empirical economics. Existing econometric models have had little success in explaining or predicting investment spending. This may be because most such models fail to account for the irreversibility of most investment spending. With irreversibility, changes in the riskiness of future cash flows or interest rates should in theory dramatically affect the decision to invest - more so than, say, a change in the levels of interest rates. Here I survey some of the empirical support for this proposition, and discuss the implications for investment modelling. |
| first_indexed | 2024-09-23T13:46:35Z |
| format | Working Paper |
| id | mit-1721.1/50136 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T13:46:35Z |
| publishDate | 2009 |
| publisher | MIT Center for Energy and Environmental Policy Research |
| record_format | dspace |
| spelling | mit-1721.1/501362019-04-12T23:30:55Z Irreversibility and the explanation of investment behavior Pindyck, Robert S. The explanation of aggregate and sectoral investment behavior has been one of the less successful endeavors in empirical economics. Existing econometric models have had little success in explaining or predicting investment spending. This may be because most such models fail to account for the irreversibility of most investment spending. With irreversibility, changes in the riskiness of future cash flows or interest rates should in theory dramatically affect the decision to invest - more so than, say, a change in the levels of interest rates. Here I survey some of the empirical support for this proposition, and discuss the implications for investment modelling. Supported by M.I.T. Center for Energy Policy Research. Supported by the National Science Foundation. 2009-12-15T17:55:55Z 2009-12-15T17:55:55Z 1990 Working Paper 90-003 28596027 Working paper (Massachusetts Institute of Technology. Center for Energy Policy Research) ; MIT-CEPR 90-003. 18 p application/pdf MIT Center for Energy and Environmental Policy Research |
| spellingShingle | Pindyck, Robert S. Irreversibility and the explanation of investment behavior |
| title | Irreversibility and the explanation of investment behavior |
| title_full | Irreversibility and the explanation of investment behavior |
| title_fullStr | Irreversibility and the explanation of investment behavior |
| title_full_unstemmed | Irreversibility and the explanation of investment behavior |
| title_short | Irreversibility and the explanation of investment behavior |
| title_sort | irreversibility and the explanation of investment behavior |
| work_keys_str_mv | AT pindyckroberts irreversibilityandtheexplanationofinvestmentbehavior |