Capital adjustment costs and firm risk aversion

Eva Carceles Poveda

doi:10.1016/S0165-1765(03)00150-2

Capital adjustment costs and firm risk aversion

Eva Carceles Poveda

Economics

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

We show that the equilibrium of a standard real business cycle model with capital adjustment costs can be supported as an equilibrium with a risk averse firm and no adjustment costs. Our result sheds light on the implications of a utility maximizing (UM) firm, which is one of the approaches proposed in the literature to get around the firm objective problem when markets are incomplete.

Original language	English
Pages (from-to)	101-107
Number of pages	7
Journal	Economics Letters
Volume	81
Issue number	1
DOIs	https://doi.org/10.1016/S0165-1765(03)00150-2
State	Published - Oct 1 2003

Keywords

Adjustment costs
Analytical solution
RBC model

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10.1016/S0165-1765(03)00150-2

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abstract = "We show that the equilibrium of a standard real business cycle model with capital adjustment costs can be supported as an equilibrium with a risk averse firm and no adjustment costs. Our result sheds light on the implications of a utility maximizing (UM) firm, which is one of the approaches proposed in the literature to get around the firm objective problem when markets are incomplete.",

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AB - We show that the equilibrium of a standard real business cycle model with capital adjustment costs can be supported as an equilibrium with a risk averse firm and no adjustment costs. Our result sheds light on the implications of a utility maximizing (UM) firm, which is one of the approaches proposed in the literature to get around the firm objective problem when markets are incomplete.

KW - Adjustment costs

KW - Analytical solution

KW - RBC model

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DO - 10.1016/S0165-1765(03)00150-2

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Capital adjustment costs and firm risk aversion

Abstract

Keywords

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