Empirical evidence on the Euler equation for investment in the US

Guido Ascari, Qazi Haque, Leandro Magnusson and Sophocles Mavroeidis

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: The Euler equation model for investment with adjustment costs and variable capital utilization is estimated using aggregate US post-war data with econometric methods that are robust to weak instruments and exploit information in possible structural changes. Various alternative identification assumptions are considered, including external instruments, and instruments obtained from Dynamic Stochastic General Equilibrium models. Results show that the elasticity of capital utilization and investment adjustment cost parameters are very weakly identified. This is because investment appears to be unresponsive to changes in capital utilization and the real interest rate.

Keywords: Investment; Adjustment costs; Weak identification (search for similar items in EconPapers)
JEL-codes: C2 E22 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2021-07
New Economics Papers: this item is included in nep-dge, nep-isf, nep-mac and nep-ore
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Citations: View citations in EconPapers (11)

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https://cama.crawford.anu.edu.au/sites/default/fil ... sson_mavroeidis0.pdf (application/pdf)

Related works:
Journal Article: Empirical evidence on the Euler equation for investment in the US (2024)
Working Paper: Empirical evidence on the Euler equation for investment in the US (2023)
Working Paper: Empirical evidence on the Euler equation for investment in the US (2023)
Working Paper: Empirical evidence on the Euler equation for investment in the US (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-65

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