Credibility, Irreversibility of Investment, and Liberalization Reforms in LDCs: A Note
AbstractEmpirical evidence of the impact of policy uncertainty on aggregate investment is mixed. However, if the relationship between policy uncertainty and investment performance is non-linear, linear regression exercises might not capture the effect of policy uncertainty. In this short paper, I present a simple model with investment irreversibility which shows that, in the presence of legal constraints on investment in foreign assets, domestic real investment performance is poorer when trade reforms are only partially incredible.
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Bibliographic InfoPaper provided by Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne in its series Documents de recherche with number 05-17.
Length: 16 pages
Date of creation: 2005
Date of revision:
Credibility; Trade Reforms; Investment Irreversibility; Capital Flight; Investment Performance;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
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