Tobin's Q and financial policy
AbstractRecent research in macroeconomics has emphasized the importance of linking the financial and real sectors and the need for working with optimizing models. TobinÃ¢â¬â¢s Q model of investment would appear to provide a framework that can satisfy these two criteria. In contrast to the original presentation of the Q model, the formal development has not recognized that the firm actively participates in a number of financial markets; in this broader context, we show that Q is likely to be an uninformative and possibly misleading signal for investment expenditures . We then endeavor to turn this negative theoretical result to positive advantage in resolving a number of empirical problems with Q models, but the modifications dictated by the theory receive little support from the data.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Monetary Economics.
Volume (Year): 19 (1987)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/inca/505566
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