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The Q Theory of Investment Under Unit Root Tests

Author

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  • de la Croix, David

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

  • Licandro, Omar

    (Universidad Carlos III, Madrid)

Abstract

We test a q investment model for Belgium using a multivariate cointegration approach. The introduction of the degree of capacity utilization duc, in addition to investment and average q, is necessary to determine the cointegration space. This supports the idea that marginal q differs from average q by a factor which is a function of duc, as suggested by Licandro (1992).

Suggested Citation

  • de la Croix, David & Licandro, Omar, 1992. "The Q Theory of Investment Under Unit Root Tests," LIDAM Discussion Papers IRES 1992005, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1992005
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    References listed on IDEAS

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    1. repec:adr:anecst:y:1992:i:27:p:04 is not listed on IDEAS
    2. Omar Licandro, 1992. "Investment Dynamics and Capacity Utilization under Monopolistic Competition," Annals of Economics and Statistics, GENES, issue 27, pages 91-113.
    3. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    4. Abel, Andrew B & Blanchard, Olivier J, 1986. "The Present Value of Profits and Cyclical Movements in Investment," Econometrica, Econometric Society, vol. 54(2), pages 249-273, March.
    5. Edmond Malinvaud, 1987. "Capital productif, incertitudes et profitabilité," Annals of Economics and Statistics, GENES, issue 5, pages 1-36.
    6. repec:adr:anecst:y:1987:i:5:p:01 is not listed on IDEAS
    7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    8. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Paper 1227, Economics Department, Queen's University.
    9. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-224, January.
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    Cited by:

    1. Verschueren, Frederic, 2000. "Co-integration inference in the value-profit relation and investment models," Economics Letters, Elsevier, vol. 69(3), pages 289-297, December.

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