Time-to-Build, Delivery Lags, and the Equilibrium Pricing of Capital Goods
AbstractThis paper characterizes the behavior of investment expenditures, optimal capital stocks, and real interest rates in the time-to-build model of investment. The paper derives equilibrium pricing relationships involving the prices of new and used capital and uses these relationships to obtain simple tests of the underlying investment technology. The paper also demonstrates that empirical versions of the delivery lag model are misspecified because the term structure of interest rates over the time horizon for which investment yields productive capital are omitted and that the use of stock market data to measure Tobin's q is inappropriate within the time-to-build model. Copyright 1993 by Ohio State University Press.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 25 (1993)
Issue (Month): 3 (August)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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- Charles Himmelberg & Alessandra del Boca & Marzio Galeotti & Paola Rota, 2005. "Investment and Time to Plan: A Comparison of Structures vs. Equipment in a Panel of Italian Firms," Working Papers 2005.54, Fondazione Eni Enrico Mattei.
- Sumru Altug & Fanny S. Demers & Michel Demers, 2004. "Tax Policy and Irreversible Investment," CDMA Working Paper Series 200404, Centre for Dynamic Macroeconomic Analysis.
- Unal Zenginobuz & Sumru Altug, 2009. "What has been the Role of Investment in Turkey's Growth Performance?," Working Papers 2009/02, Bogazici University, Department of Economics.
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- Altug, Sumru & Demers, Fanny S. & Demers, Michel, 2009. "The investment tax credit and irreversible investment," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 509-522, December.
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