Investment, Uncertainty, and Irreversibility in Ghana
Catherine Pattillo
Additional contact information
Catherine Pattillo: International Monetary Fund
IMF Staff Papers, 1998, vol. 45, issue 3, 522-553
Abstract:
Panel data on Ghanaian manufacturing firms are used to test predictions from models of irreversible investment under uncertainty. Information on the entrepreneur's subjective probability distribution over future demand for the firm's products is used to construct the expected variance of demand, which is used as a measure of uncertainty. Empirical results support the prediction that firms wait to invest until the marginal revenue product of capital reaches a firm-specific hurdle level. Moreover, higher uncertainty raises the hurdle level that triggers investment, and uncertainty has a negative effect on investment levels that is greater for firms with more irreversible investment.
JEL-codes: C24 D81 D92 (search for similar items in EconPapers)
Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (27)
Downloads: (external link)
http://www.jstor.org/stable/3867414?origin=pubexport main text (application/pdf)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:pal:imfstp:v:45:y:1998:i:3:p:522-553
Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41308/PS2
Access Statistics for this article
More articles in IMF Staff Papers from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().