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dc.contributor.authorPindyck, Robert S.en_US
dc.contributor.authorSolimano, Andrésen_US
dc.contributor.otherMassachusetts Institute of Technology. Center for Energy and Environmental Policy Research.en_US
dc.date.accessioned2009-12-15T23:59:36Z
dc.date.available2009-12-15T23:59:36Z
dc.date.issued1993en_US
dc.identifier93003en_US
dc.identifier.urihttp://hdl.handle.net/1721.1/50200
dc.description.abstractA recent literature suggests that because investment expenditures are irreversible and can be delayed, they may be highly sensitive to uncertainty. We briefly summarize the theory, stressing its empirical implications. We then use cross-section and time-series data for a set of developing and industrialized countries to explore the relevance of the theory for aggregate investment. We find that the volatility of the marginal profitability of capital -- a summary measure of uncertainty -- affects investment as the theory suggests, but the size of the effect is moderate, and is greatest for developing countries. We also find that this volatility has little correlation with indicia of political instability used in recent studies of growth, as well as several indicia of economic instability. Only inflation is highly correlated with this volatility, and is also a robust explanator of investment.en_US
dc.description.sponsorshipSupported by the MIT Center for Energy and Environmental Policy Researchn by the National Science Foundation.en_US
dc.format.extent48 pen_US
dc.publisherMIT Center for Energy and Environmental Policy Researchen_US
dc.relation.ispartofseriesMIT-CEEPR (Series) ; 93-003WP.en_US
dc.titleEconomic instability and aggregate investmenten_US
dc.typeWorking Paperen_US
dc.identifier.oclc35719893en_US


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