Estimates of Investment Functions and Some Implications for Productivity Growth
My original assignment was first to evaluate Larry Summers’ paper as a description of the current state of the art regarding investment behavior and second to determine the adequacy of the investment sector of Michael Evans’ econometric model (Evans, 1980) in light of Summers’ paper. The late arrival of Larry’s paper forced me to alter my strategy, and it is just as well. Summers’ investment function is a very long-run relationship that does not purport to explain cyclical movements in business investment outlays, while Evans’ relationship is a more traditional analysis of quarterly expenditures.1 Moreover, Summers is concerned with only corporate investment, while Evans deals with all of domestic fixed investment. My revised strategy was to employ two papers recently presented at Brookings Conferences (Hendershott, 1980, and Hendershott and Hu, 1981) as the standard with which to contrast Evans’ work.
KeywordsReal Interest Rate User Cost Real Price Credit Availability Tenure Choice
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