Pitfalls in investment Euler equations
This paper investigates three pitfalls concerning the test of the Euler equation facing quadratic adjustment costs and perfect capital markets on a large balanced panel data of 4025 French firms. First, the quadratic parameterization of adjustment costs is too restrictive, and power series approximations of adjustment costs are tested. Second, we isolate firms whose optimal Euler condition is not altered even in the presence of fixed adjustment costs. Third, we identify instruments which contribute to model failure via standard GMM tests. These methods point out that financial instruments contribute to reject strongly the standard model, which shows that it is misspecified.
(This abstract was borrowed from another version of this item.)
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
- Barran, Fernando & Peeters, Marga, 1998.
"Internal finance and corporate investment: Belgian evidence with panel data,"
Elsevier, vol. 15(1), pages 67-89, January.
- Barran, Fernando & Peeters, Marga, 1998. "Internal finance and corporate investment: Belgian evidence with panel data," MPRA Paper 28504, University Library of Munich, Germany.
- Abel, Andrew B & Eberly, Janice C, 1994.
"A Unified Model of Investment under Uncertainty,"
American Economic Review,
American Economic Association, vol. 84(5), pages 1369-1384, December.
- Andrew B. Abel & Janice C. Eberly, "undated". "A Unified Model of Investment Under Uncertainty," Rodney L. White Center for Financial Research Working Papers 14-93, Wharton School Rodney L. White Center for Financial Research.
- Andrew B. Abel & Janice C. Eberly, 1993. "A Unified Model of Investment Under Uncertainty," NBER Working Papers 4296, National Bureau of Economic Research, Inc.
- James M. Poterba & Lawrence H. Summers, 1984.
"The Economic Effects of Dividend Taxation,"
NBER Working Papers
1353, National Bureau of Economic Research, Inc.
- Chatelain, Jean-Bernard, 2000. "Explicit Lagrange multiplier for firms facing a debt ceiling constraint1," Economics Letters, Elsevier, vol. 67(2), pages 153-158, May.
- Schiantarelli, Fabio, 1996. "Financial Constraints and Investment: Methodological Issues and International Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 12(2), pages 70-89, Summer.
- Stephen Bond & Julie Elston & Jacques Mairesse & Benoit Mulkay, 1997.
"Financial Factors and Investment in Belgium, France, Germany and the UK:A Comparison Using Company Panel Data,"
NBER Working Papers
5900, National Bureau of Economic Research, Inc.
- Stephen Bond & Julie Ann Elston & Jacques Mairesse & Benoît Mulkay, 1999. "Financial Factors and Investment in Belgium, France, Germany and the UK : A Comparison using Company Panel Data," Working Papers 99-64, Centre de Recherche en Economie et Statistique.
- Steve Bond & Julie Elston & Jacques Mairesse & Benoit Mulkay, 1997. "Financial factors and investment in Belgium, France, German and the UK: A comparison using company panel data," IFS Working Papers W97/08, Institute for Fiscal Studies.
- Newey, Whitney K & West, Kenneth D, 1987. "Hypothesis Testing with Efficient Method of Moments Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 777-787, October.
- Jean-Bernard Chatelain, 1998.
"Investment facing Credit Rationing,"
Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers)
- Chatelain, Jean-Bernard, 1998. "Investment Facing Credit Rationing," The Manchester School of Economic & Social Studies, University of Manchester, vol. 66(0), pages 102-115, Supplemen.
- R. Glenn Hubbard, 1998.
"Capital-Market Imperfections and Investment,"
Journal of Economic Literature,
American Economic Association, vol. 36(1), pages 193-225, March.
- Newey, W.K., 1989.
"Series Estimation Of Regression Functionals,"
348, Princeton, Department of Economics - Econometric Research Program.
- Jean-Bernard Chatelain, 2000. "Explicit Lagrange Multiplier for Firms Facing a Debt Ceiling Constraint," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00119408, HAL.
- Toni M. Whited, 1990.
"Debt, liquidity constraints, and corporate investment: evidence from panel data,"
Finance and Economics Discussion Series
114, Board of Governors of the Federal Reserve System (U.S.).
- Whited, Toni M, 1992. " Debt, Liquidity Constraints, and Corporate Investment: Evidence from Panel Data," Journal of Finance, American Finance Association, vol. 47(4), pages 1425-1460, September.
- Kocherlakota, Narayana R., 1990. "On tests of representative consumer asset pricing models," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 285-304, October.
- Hall, Alastair R., 2004. "Generalized Method of Moments," OUP Catalogue, Oxford University Press, number 9780198775201.
- Stephen Bond & Costas Meghir, 1994. "Dynamic Investment Models and the Firm's Financial Policy," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 197-222.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Whited, Toni M, 1998. "Why Do Investment Euler Equations Fail?," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 479-488, October.
- repec:hal:journl:halshs-00119408 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:18:y:2001:i:2:p:159-179. 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: (Dana Niculescu)
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.