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In this paper, we provide a dynamic general equilibrium framework with an explicit investment-financing constraint. The constraint is intended as a reduced form to capture the balance sheet effects, which have been widely regarded as an important determinant of financial crises. We derive a link between the value of the firm and the social welfare and we find that the value of the firm can be greater with than without the constraint. Our model also sheds light on how the effects of productivity shocks and bubbles may be amplified by the financing constraint.

Accounting --- Banks and Banking --- Financial Risk Management --- Investments: Stocks --- Macroeconomics --- Optimization Techniques --- Programming Models --- Dynamic Analysis --- Intertemporal Firm Choice and Growth, Investment, or Financing --- Public Administration --- Public Sector Accounting and Audits --- Macroeconomics: Consumption --- Saving --- Wealth --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Crises --- Financial reporting, financial statements --- Investment & securities --- Banking --- Economic & financial crises & disasters --- Financial statements --- Consumption --- Stocks --- Financial crises --- Finance, Public --- Economics --- Banks and banking

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A strand of research documents Chile’s copper dependence hence significant exposure to terms of trade shocks. Copper prices’ sharp decline and forecast uncertainty since the end of the commodity super-cycle has rekindled the debate on Chile’s adjustment capacity to external shocks. Following Malz (2014), this paper builds a time-varying measure of copper price uncertainty using options contracts. VAR analysis shows that the investment response to an uncertainty shock of average magnitude in the sample is strong and persistent: the cumulative fall in investment from trend at a one-year horizon ranges 2–5.8 percentage points; and it takes between 1½ and 2 years for investment to return to its trend level. Empirical ranges depend on alternative definitions for investment, uncertainty, and options’ maturing time.

Copper --- Prices --- Native element minerals --- Transition metals --- Investments: Metals --- Foreign Exchange --- Investments: Options --- Macroeconomics --- Intertemporal Firm Choice and Growth, Investment, or Financing --- Investment --- Capital --- Intangible Capital --- Capacity --- 'Panel Data Models --- Spatio-temporal Models' --- Metals and Metal Products --- Cement --- Glass --- Ceramics --- Price Level --- Inflation --- Deflation --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Currency --- Foreign exchange --- Finance --- Investment & securities --- Metal prices --- Asset prices --- Exchange rates --- Options --- Financial institutions --- Commodities --- Metals --- Derivative securities --- Chile --- Panel Data Models --- Spatio-temporal Models

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Deregulation of the financial system often proceeds in tandem with macroeconomic stabilization centered on monetary and other financial targets. This paper presents a model where there may be conflict between these processes. The indicator properties of some financial variables may be rendered unstable by the liberalization process. However, other, carefully selected financial aggregates may contain information about economic activity that is useful to policy makers during stabilization. Data from a group of selected African and Asian countries is examined. These are broadly consistent with the predictions of the model, while highlighting the importance of macroeconomic and financial stability for the success of financial reforms.

Banks and Banking --- Money and Monetary Policy --- Industries: Financial Services --- Intertemporal Firm Choice and Growth, Investment, or Financing --- Macroeconomics: Consumption --- Saving --- Wealth --- Money Supply --- Credit --- Money Multipliers --- Monetary Policy --- Central Banks and Their Policies --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Interest Rates: Determination, Term Structure, and Effects --- Financial Institutions and Services: General --- Banking --- Monetary economics --- Finance --- Commercial banks --- Bank credit --- Real interest rates --- Financial institutions --- Financial services --- Money --- Financial sector --- Economic sectors --- Banks and banking --- Interest rates --- Financial services industry --- Sri Lanka

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This study tests for the presence of real options effects induced by uncertainty and (partial) irreversibility on fixed capital investment using Italian company data. The approach recognizes that firm-level investment spending may, itself, be aggregated over multiple investment decisions in separate types of capital goods and emphasizes effects of uncertainty on short-run investment dynamics. Using a survey-based measure of uncertainty related to the assessment of managers responsible for the firms' investment plans, the study finds evidence of heterogeneous and nonlinear dynamics pointing to a slower adjustment of investment in response to demand shocks at higher levels of uncertainty. The results also point to an additional source of nonlinearity originating from a convex response of investment to demand shocks.

Business cycles --- Econometric models. --- Econometrics --- Investments: General --- Investments: Bonds --- Investments: Stocks --- Industries: Manufacturing --- 'Panel Data Models --- Spatio-temporal Models' --- Intertemporal Firm Choice and Growth, Investment, or Financing --- Investment --- Capital --- Intangible Capital --- Capacity --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Estimation --- General Financial Markets: General (includes Measurement and Data) --- Industry Studies: Manufacturing: General --- Investment & securities --- Econometrics & economic statistics --- Manufacturing industries --- Macroeconomics --- Stocks --- Estimation techniques --- Bonds --- Manufacturing --- Capital accumulation --- Financial institutions --- Econometric analysis --- Economic sectors --- National accounts --- Econometric models --- Saving and investment --- United Kingdom --- Panel Data Models --- Spatio-temporal Models

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This study investigates the relationship between uncertainty and investment using U.K. data at different levels of aggregation. Motivated by a comparative econometric analysis using a firm-level panel and aggregate time-series data, we analyze the implications of aggregating nonlinear microeconomic processes. Replicating firm-level evidence that uncertainty influences investment dynamics proves to be challenging. Even using perfectly consistent data sources, this requires both exact aggregation of the underlying micro equations, and controlling for the unobserved influences on investment that are commonly subsumed into time dummies in panel studies. These conditions are unlikely to be satisfied in most aggregate econometric studies.

Electronic books. -- local. --- Investments -- Great Britain -- Econometric models. --- Uncertainty -- Econometric models. --- Econometrics --- Investments: Bonds --- Investments: Stocks --- Macroeconomics --- Industries: Manufacturing --- Single Equation Models --- Single Variables: General --- Intertemporal Firm Choice and Growth, Investment, or Financing --- Investment --- Capital --- Intangible Capital --- Capacity --- Industry Studies: Manufacturing: General --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- Macroeconomics: Production --- General Financial Markets: General (includes Measurement and Data) --- Manufacturing industries --- Investment & securities --- Econometrics & economic statistics --- Manufacturing --- Stocks --- Time series analysis --- Production growth --- Bonds --- Economic sectors --- Financial institutions --- Econometric analysis --- Production --- Economic theory --- United Kingdom --- Uncertainty --- Investments --- Econometric models.