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CBO’s Model for Forecasting Business Investment: Working Paper 2018-09

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  • Mark Lasky

Abstract

CBO models most business investment by using a modified neoclassical specification. That specification is similar to the neoclassical model in that the desired capital stock depends positively on output and negatively on the cost of capital, which includes the price of capital, taxes, and rates of return. The specification differs from the neoclassical model in that the capital stock adjusts more rapidly to changes in output than to changes in the cost of capital. In contrast, CBO models investment in capital used by agriculture and extractive industries as depending

Suggested Citation

  • Mark Lasky, 2018. "CBO’s Model for Forecasting Business Investment: Working Paper 2018-09," Working Papers 54871, Congressional Budget Office.
    • Handle: RePEc:cbo:wpaper:54871
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    File URL: https://www.cbo.gov/system/files/2018-12/54871-workingpaper.pdf
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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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