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What explains the lagged-investment effect?

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  • Eberly, Janice
  • Rebelo, Sergio
  • Vincent, Nicolas

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 et al. (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.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 59 (2012)
Issue (Month): 4 ()
Pages: 370-380

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Handle: RePEc:eee:moneco:v:59:y:2012:i:4:p:370-380

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Web page: http://www.elsevier.com/locate/inca/505566

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Cited by:
  1. Alejandro Justiniano & Giorgio Primiceri & Andrea Tambalotti, 2013. "Household leveraging and deleveraging," Staff Reports 602, Federal Reserve Bank of New York.
  2. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2013. "The Effects of the saving and banking glut on the U.S. economy," Staff Reports 648, Federal Reserve Bank of New York.
  3. Simon Gilchrist & Jae W. Sim & Egon Zakrajšek, 2014. "Uncertainty, Financial Frictions, and Investment Dynamics," NBER Working Papers 20038, National Bureau of Economic Research, Inc.
  4. Razzak, Weshah, 2013. "An Empirical Study of Sectoral-Level Capital Investments in New Zealand," MPRA Paper 52461, University Library of Munich, Germany.
  5. Leila E. Davis, 2013. "Financialization and the nonfinancial corporation: an investigation of firmlevel investment behavior in the U.S., 1971-2011," UMASS Amherst Economics Working Papers 2013-08, University of Massachusetts Amherst, Department of Economics.

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