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Investment Spending in Australia: Further Study and Interpretation

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  • BEN J. HEUDRA
  • WILLIAM M. SCARTH

Abstract

Recent work in macro theory suggests that aggregate ‘demand’ policies have direct supply‐side effects in the short run, if Lucas's standard specification of the nonlinear adjustment costs for capital is generalized In this paper, we estimate an investment equation (involving Tobin's valuation ratio and Australian data) which nests three hypotheses: Lucas's standard specification of adjustment costs, a simple generalization which permits labour to be involved in the installation of capital and a model which allows for liquidity constraints. The results support the suggested alternative formulation of the q‐theory

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  • Ben J. Heudra & William M. Scarth, 1990. "Investment Spending in Australia: Further Study and Interpretation," The Economic Record, The Economic Society of Australia, vol. 66(4), pages 295-307, December.
    • Handle: RePEc:bla:ecorec:v:66:y:1990:i:4:p:295-307
    DOI: 10.1111/j.1475-4932.1990.tb01735.x
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    References listed on IDEAS

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    10. McKibbin, Warwick J & Siegloff, Eric S, 1988. "A Note on Aggregate Investment in Australia," The Economic Record, The Economic Society of Australia, vol. 64(186), pages 209-215, September.
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    Cited by:

    1. Myatt, Anthony & Scarth, William M., 1995. "Can fiscal spending be contractionary when interest rates have supply-side effects?," Journal of Macroeconomics, Elsevier, vol. 17(2), pages 289-301.

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