Financial Constraints and Farm Investment: A Bayesian Examination

Chad Hart and Sergio Lence

Journal of Business & Economic Statistics, 2004, vol. 22, issue 1, 51-63

Abstract: This study contributes to the q-based empirical investment literature by using a Bayesian approach to analyze the impact of internal financial variables on a q-based investment model, accounting specifically for variable selection and incorporating outliers explicitly within the advocated modeling framework. For the balanced panel analyzed, a farm's liquidity situation is found to affect its investment significantly. Incorporation of an outlier detection component changes the results drastically, in both the variables chosen and the parameter estimates. The results and the nature of most investment data suggest that not accounting for outliers may lead to inaccurate inference.

Date: 2004
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