Wait-and See: Investment Options under Policy Uncertainty

Nancy Stokey

Review of Economic Dynamics, 2016, vol. 21, 246-265

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)

Keywords: Policy uncertainty; Investment; Option value; Business cycles (search for similar items in EconPapers)
JEL-codes: D92 E22 E32 H32 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (73)

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DOI: 10.1016/j.red.2015.06.001

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