EconPapers    
Economics at your fingertips  
 

Modeling aggregate investment: a fundamentalist approach

John Roberts

No 2003-48, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper applies some lessons from recent estimation of investment models with firm-level data to the aggregate data with an eye to rehabilitating convex costs of adjusting the capital stock. In recent firm-level work, the response of investment to output and other \"fundamental\" variables is interpreted in terms of the traditional convex-adjustment-cost model, implying annual capital-stock adjustment speeds on the order of 15 to 35 percent. In aggregate data, I find that this \"fundamentalist\" model can account for the reduced-form effect of output on investment and the estimated capital-stock adjustment speed is similar to those from firm-level studies B--around 25 percent per year. To account for the slower adjustment to changes in the cost of capital, I consider a model in which the capital-intensity of production is also costly to adjust. I find that this model can account for the reduced-form effects of both output and the cost of capital on investment.

Keywords: Capital; Investments (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/2003/200348/200348abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/2003/200348/200348pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2003-48

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2022-01-15
Handle: RePEc:fip:fedgfe:2003-48