What Explains the Lagged Investment Effect?

Janice Eberly, Sergio Rebelo () and Nicolas Vincent

No 16889, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The best predictor of current investment at the firm level is lagged investment. This lagged-investment effect is empirically more important than the cash-flow and Q effects combined. We show that the specification of investment adjustment costs proposed by Christiano, Eichenbaum and Evans (2005) predicts the presence of a lagged-investment effect and that a generalized version of their model is consistent with the behavior of firm-level data from Compustat.

JEL-codes: E2 (search for similar items in EconPapers)
Date: 2011-03
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as Eberly, Janice & Rebelo, Sergio & Vincent, Nicolas, 2012. "What explains the lagged-investment effect?," Journal of Monetary Economics, Elsevier, vol. 59(4), pages 370-380.

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Journal Article: What explains the lagged-investment effect? (2012)
Working Paper: What Explains the Lagged Investment Effect? (2011)
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