Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/147446 
Authors: 
Year of Publication: 
2015
Series/Report no.: 
Discussion Paper Series No. 32
Publisher: 
University of Freiburg, Department of International Economic Policy (iep), Freiburg i. Br.
Abstract: 
This paper studies the aggregate implications of microeconomic investment irreversibility and idiosyncratic uncertainty in a simple growth model by highlighting real option effects. We endogenize the drift rate of real option by connecting it to the state of the economy. Thereby, we extend the analysis of the optimal capital accumulation policy in the firm sector and show the different implications of idiosyncratic and aggregate uncertainty on growth dynamics.
Subjects: 
Irreversible investment
Idiosyncratic uncertainty
real options
growth
JEL: 
D81
E10
E22
O40
Document Type: 
Working Paper

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