Advanced Search
MyIDEAS: Login to save this article or follow this journal

The performance of traditional macroeconomic models of businesses' investment spending

Contents:

Author Info

  • Richard W. Kopcke
  • Richard S. Brauman
Registered author(s):

    Abstract

    The rate of capital formation by businesses has long been among the most closely watched elements of the national accounts. During the last decade, this component of investment attracted considerable interest as capital spending helped support our uncommonly high rate of economic growth. Not only did this spending lift the growth of aggregate demand, it also increased our capacity for supplying goods and services, which in turn could allow output to continue growing rapidly in the future. ; This article analyzes the performance of conventional models of investment spending by comparing their abilities to describe this spending from 1960 to 1990 as well as their abilities to forecast spending during the 1990s. The authors find that recent shifts in the composition of the stock of capital goods and in the relative prices of capital goods have undermined the performance of these models of aggregate spending. In many ways, aggregate capital spending seems to depend more heavily than it has in the past on industries' unique circumstances and changing technologies. The authors suggest that errors of the models, the changing composition of capital, and new methods of measuring the stocks of capital warrant considering more disaggregated descriptions of investment spending.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bostonfed.org/economic/neer/neer2001/neer201a.htm
    Download Restriction: no

    File URL: http://www.bostonfed.org/economic/neer/neer2001/neer201a.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by Federal Reserve Bank of Boston in its journal New England Economic Review.

    Volume (Year): (2001)
    Issue (Month): ()
    Pages: 3-39

    as in new window
    Handle: RePEc:fip:fedbne:y:2001:p:3-39:n:2

    Contact details of provider:
    Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210
    Phone: 617-973-3397
    Fax: 617-973-4221
    Email:
    Web page: http://www.bos.frb.org/
    More information through EDIRC

    Order Information:
    Email:

    Related research

    Keywords: Investments ; Capital;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Andrew B. Abel & Avinash K. Dixit & Janice C. Eberly & Robert S. Pindyck, 1995. "Options, the Value of Capital, and Investment," NBER Working Papers 5227, National Bureau of Economic Research, Inc.
    2. Galeotti, Marzio & Schiantarelli, Fabio, 1991. "Generalized Q Models for Investment," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 383-92, August.
    3. Pindyck, Robert S, 1991. "Irreversibility, Uncertainty, and Investment," Journal of Economic Literature, American Economic Association, vol. 29(3), pages 1110-48, September.
    4. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
    5. Gordon, Robert J, 1990. "What Is New-Keynesian Economics?," Journal of Economic Literature, American Economic Association, vol. 28(3), pages 1115-71, September.
    6. Milka S. Kirova & Robert S. Lipsey, 1998. "Measuring Real Investment: Trends in the United States and International Comparisons," NBER Working Papers 6404, National Bureau of Economic Research, Inc.
    7. Morrison, Catherine J, 1992. "Unraveling the Productivity Growth Slowdown in the United States, Canada and Japan: The Effects of Subequilibrium, Scale Economies and Markups," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 381-93, August.
    8. Abel, Andrew B., 1980. "Empirical investment equations : An integrative framework," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 12(1), pages 39-91, January.
    9. William D. Nordhaus & James Tobin, 1971. "Is Growth Obsolete?," Cowles Foundation Discussion Papers 319, Cowles Foundation for Research in Economics, Yale University.
      • William D. Nordhaus & James Tobin, 1973. "Is Growth Obsolete?," NBER Chapters, in: The Measurement of Economic and Social Performance, pages 509-564 National Bureau of Economic Research, Inc.
      • William D. Nordhaus & James Tobin, 1972. "Is Growth Obsolete?," NBER Chapters, in: Economic Research: Retrospect and Prospect Vol 5: Economic Growth, pages 1-80 National Bureau of Economic Research, Inc.
    10. Blackorby, Charles & Schworm, William, 1988. "The Existence of Input and Output Aggregates in Aggregate Production Functions," Econometrica, Econometric Society, vol. 56(3), pages 613-43, May.
    11. Fisher, Franklin M, 1969. "The Existence of Aggregate Production Functions," Econometrica, Econometric Society, vol. 37(4), pages 553-77, October.
    12. Charles R. Hulten, 1991. "The Measurement of Capital," NBER Chapters, in: Fifty Years of Economic Measurement: The Jubilee of the Conference on Research in Income and Wealth, pages 119-158 National Bureau of Economic Research, Inc.
    13. Abel, Andrew B & Blanchard, Olivier J, 1986. "The Present Value of Profits and Cyclical Movements in Investment," Econometrica, Econometric Society, vol. 54(2), pages 249-73, March.
    14. Mankiw, N Gregory, 1989. "Real Business Cycles: A New Keynesian Perspective," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 79-90, Summer.
    15. Christopher A. Sims, 1982. "Policy Analysis with Econometric Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 107-164.
    16. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    17. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    18. Stewart C. Myers, 1989. "Still searching for optimal capital structure," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 33, pages 80-105.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Orhangazi, Ozgur, 2007. "Financialization and Capital Accumulation in the Nonfinancial Corporate Sector: A Theoretical and Empirical Investigation on the US Economy, 1973-2004," MPRA Paper 7724, University Library of Munich, Germany.
    2. Baghestani, Hamid, 2011. "Federal Reserve and private forecasts of growth in investment," Journal of Economics and Business, Elsevier, vol. 63(4), pages 290-305, July.
    3. 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.
    4. Sylvain Martel, 2005. "Y a-t-il eu surinvestissement au Canada durant la seconde moitié des années 1990?," Working Papers 05-5, Bank of Canada.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:fip:fedbne:y:2001:p:3-39:n:2. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.