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Wait-and See: Investment Options under Policy Uncertainty

Author

Listed:
  • Nancy Stokey

    (University of Chicago)

Abstract
This paper develops a model of investment decisions in which uncertainty about a one-time change in tax policy induces the firm to temporarily stop investing---to adopt a wait-and-see policy. After the uncertainty is resolved, the firm exploits the tabled projects, generating a temporary investment boom. (Copyright: Elsevier)

Suggested Citation

  • Nancy Stokey, 2016. "Wait-and See: Investment Options under Policy Uncertainty," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 21, pages 246-265, July.
    • Handle: RePEc:red:issued:14-113
    DOI: 10.1016/j.red.2015.06.001
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    References listed on IDEAS

    as
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    6. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
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    More about this item

    Keywords

    Policy uncertainty; Investment; Option value; Business cycles;
    All these keywords.

    JEL classification:

    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm

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