Investment in Swedish manufacturing: Analysis and forecasts
Bengt Assarsson (),
Claes Berg and
Per Jansson ()
Empirical Economics, 2004, vol. 29, issue 2, 280 pages
This paper uses a neoclassical investment model extended with installation costs for capital, agency costs for investment financing, and the possibility of the firm being output constrained as a framework for an empirical analysis of investment behaviour in the Swedish manufacturing industry. The theory is implemented within a multivariate error-correction approach on data covering the time period 1951 to 1995, and we gain the following main results: (1) Tobin’s average Q is not the sole determinant of investment, neither in the short nor in the long run, and other variables like real output and capital gearing also affect investment activity; (2) the out-of-sample forecasts of the model track the evolution of actual investment growth quite impressively, especially at short- and medium-term horizons (1–2 years); (3) a relative equity-price variable is shown to constitute a good approximation of average Q, both for empirical modelling in general and forecasting in particular. Copyright Springer-Verlag 2004
Keywords: Forecasting investment; multivariate error-correction model; neoclassical investment theory; Tobin’s Q (search for similar items in EconPapers)
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Working Paper: Investment in Swedish Manufacturing: Analysis and Forecasts (1999)
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