This paper shows that if demand is unknown and continuously changing and if investment is costly, then output and investment are cyclical. The cycles are generated by changes in information over time as investors increase production and, thus, accumulate more information about demand. These are, therefore, informational cycles. The paper also shows that the frequency of cycles depends positively on profitability and negatively on the rate of interest. Copyright 1994 by The Review of Economic Studies Limited.
Volume (Year): 61 (1994)
Issue (Month): 1 (January)
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