Chapter

Dynamic Models of Investment

Fabio-Cesare Bagliano and Giuseppe Bertola

in Models for Dynamic Macroeconomics

Published in print February 2004 | ISBN: 9780199266821
Published online January 2005 | e-ISBN: 9780191601606 | DOI: http://dx.doi.org/10.1093/0199266824.003.0002
Dynamic Models of Investment

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Introduces continuous‐time Hamiltonian and stochastic calculus techniques in the presence of convex adjustment costs or irreversibility constraints. Dynamic optimality conditions and phase diagram illustrations formalize important qualitative insights as to the role of expectations in the study of firms’ investment decisions, highlighting their forward‐looking character.

Keywords: adjustment costs; expectations; Hamiltonian; phase diagram; stochastic calculus

Chapter.  24218 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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