Explaining the investment boom of the 1990s
Real equipment investment in the United States has boomed in recent years, led by soaring investment in computers. We find that traditional aggregate econometric models completely fail to capture the magnitude of this recent growth--mainly because these models neglect to address two features that are crucial (and unique) to the current investment boom. First, the pace at which firms replace depreciated capital has increased. Second, investment has been more sensitive to the cost of capital. We document that these two features stem from the special behavior of investment in computers and therefore propose a disaggregated approach. This produces an econometric model that successfully explains the 1990s equipment investment boom.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.federalreserve.gov/
More information through EDIRC
|Order Information:||Web: http://www.federalreserve.gov/pubs/feds/fedsorder.html|
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.:
- Alan J. Auerbach, 1986.
"Tax Reform and Adjustment Costs: The Impact on Investment and Market Value,"
NBER Working Papers
2103, National Bureau of Economic Research, Inc.
- Auerbach, Alan J, 1989. "Tax Reform and Adjustment Costs: The Impact on Investment and Market Value," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 939-62, November.
- Matthew D. Shapiro, 1984.
"The Dynamic Demand for Capital and Labor,"
Cowles Foundation Discussion Papers
735, Cowles Foundation for Research in Economics, Yale University.
- Bernanke, Ben & Bohn, Henning & Reiss, Peter C., 1988.
"Alternative non-nested specification tests of time-series investment models,"
Journal of Econometrics,
Elsevier, vol. 37(3), pages 293-326, March.
- Ben S. Bernanke & Henning Bohn & Peter C. Reiss, 1985. "Alternative Nonnested Specification Tests of Time Series Investment Models," NBER Technical Working Papers 0049, National Bureau of Economic Research, Inc.
- Stephen D. Oliner, 1993.
"Constant-Quality Price Change , Depreciation, and Retirement of Mainframe Computers,"
in: Price Measurements and Their Uses, pages 19-62
National Bureau of Economic Research, Inc.
- Stephen D. Oliner, 1990. "Constant-quality price change, depreciation, and retirement of mainframe computers," Working Paper Series / Economic Activity Section 110, Board of Governors of the Federal Reserve System (U.S.).
- Oliner, Stephen & Rudebusch, Glenn & Sichel, Daniel, 1995.
"New and Old Models of Business Investment: A Comparison of Forecasting Performance,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 27(3), pages 806-26, August.
- Stephen Oliner & Glenn Rudebusch & Daniel Sichel, 1993. "New and old models of business investment: a comparison of forecasting performance," Working Paper Series / Economic Activity Section 141, Board of Governors of the Federal Reserve System (U.S.).
- Nobuhiro Kiyotaki & Kenneth D. West, 1996.
"Business Fixed Investment and the Recent Business Cycle in Japan,"
NBER Working Papers
5546, National Bureau of Economic Research, Inc.
- Nobuhiro Kiyotaki & Kenneth D. West, 1996. "Business Fixed Investment and the Recent Business Cycle in Japan," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 277-344 National Bureau of Economic Research, Inc.
- Lars Peter Hansen & Thomas J. Sargent, 1979.
"Formulating and estimating dynamic linear rational expectations models,"
127, Federal Reserve Bank of Minneapolis.
- Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
- Feldstein, Martin S & Rothschild, Michael, 1974. "Towards an Economic Theory of Replacement Investment," Econometrica, Econometric Society, vol. 42(3), pages 393-423, May.
When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2000-11. 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: (Kris Vajs)
If references are entirely missing, you can add them using this form.