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- Title
Credibility, Irreversibility of Investment, and Liberalization Reforms in LDCs.
- Authors
Bassanini, Andrea
- Abstract
Empirical evidence of the impact of policy uncertainty on aggregate investment is mixed. However, if the relationship between policy uncertainty and investment performance is nonlinear, linear regression exercises might not capture the effect of policy uncertainty. In this 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 liberalization reforms are only partially incredible.
- Subjects
INVESTMENTS; REGRESSION analysis; LIBERALISM; POLITICAL science; DEVELOPING countries
- Publication
Economic Notes, 2006, Vol 35, Issue 2, p203
- ISSN
0391-5026
- Publication type
Article
- DOI
10.1111/j.1468-0300.2006.00165.x