Analysis of mechanisms of production investment stimulation in an imperfect capital market based on a mathematical model (Q6043530)

From the point of view of a production owner, market investment depends on the state of the business environment and competes with investment in consumption. The problem arises of estimating the profitability threshold at which private market investment is preferred to private consumption. The authors propose an approach to the solution of this problem in terms of a mathematical model of investment behavior of a production owner in an imperfect capital market. The model is formalized as an infinite-horizon optimal control problem with a state constraint. The solution of the problem is based on constructing a viscosity solution of the Hamilton-Jacobi-Bellman equation. It is shown that the investment strategy of a production owner can depend substantially on the business environment state. Based on the results of this study, an explanation is proposed for the transition from recovery growth to stagnation in the Russian economy in late 2007, which was accompanied by recession of investment activities in the manufacturing sector.