These studies of the cost of capital will inspire and guide policy-makerswho share the goal of making the allocation of capital in a market economy moreefficient.Volume 1 presents pioneering studies of the cost of capital as adeterminant of investment expenditures. The cost of capital summarizes the futureconsequences of investment essential for current decisions. This concept has becomean indispensible tool for studying the dynamics of investment behavior. Bothmacroeconome tric models and intertemporal general equilibrium models have employedthe cost of capital as a determinant of short- and long-term investmentexpenditures.