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Aggregate implications of lumpy investment under heterogeneity and uncertainty: a model of collective behavior

Author

Listed:
  • Yoshiyuki Arata

    (Research Institute of Economy, Trade and Industry)

  • Yosuke Kimura

    (Policy Research Institute)

  • Hiroki Murakami

    (Chuo University)

Abstract

Recent studies highlight the effect of uncertainty on investment decisions, i.e., the “wait and see” effect. In the existing literature, however, uncertainty is viewed as just an exogenous variable. In this paper, uncertainty is not exogenously given but endogenously determined, generating a feedback-loop between micro-behaviors and the macroeconomic environment. In particular, we assume that when uncertainty is high, expectations and behaviors of micro-agents are more heterogeneous. Under these settings, we show that on the one hand heterogeneity contributes to the stability at the macroscopic level, but on the other hand this macro-stability is suddenly lost when investors are sensitive to uncertainty. Namely, investors suddenly and simultaneously “wait and see”.

Suggested Citation

  • Yoshiyuki Arata & Yosuke Kimura & Hiroki Murakami, 2017. "Aggregate implications of lumpy investment under heterogeneity and uncertainty: a model of collective behavior," Evolutionary and Institutional Economics Review, Springer, vol. 14(2), pages 311-333, December.
    • Handle: RePEc:spr:eaiere:v:14:y:2017:i:2:d:10.1007_s40844-017-0074-5
    DOI: 10.1007/s40844-017-0074-5
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    More about this item

    Keywords

    Lumpy investment; Pseudo-compound Poisson process; Uncertainty; Collective behavior;
    All these keywords.

    JEL classification:

    • 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
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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