Aggregate business fixed investment
An aggregate business fixed investment error correction model (ECM) is estimated with Icelandic data. The user cost of capital increased considerably in the 1980s as capital markets in Iceland were liberalised and interest rates were adjusting. From the 1990s and onwards, however, the user cost has been decreasing steadily. And the relative price of business investment has been downward trending since the 1980s. A high Q ratio over the period portrays an increased demand for capital. The first order condition of capital for profits which is derived for a constant elasticity of substitution production function has minor long-run role for the user cost. Investment and capital, and investment, value added and the user cost do, however, give expected estimates of cointegration coefficients. In the short-run dynamics of the ECM, gearing, Q and profit ratios move with investment. Official figures show an unprecedented capital decrease in the 1990s in Iceland. The possibility of mismeasured technology investment is explored briefly.
|Date of creation:||Sep 2005|
|Contact details of provider:|| Postal: Kalkofnsvegi 1, 150 Reykjavik|
Web page: http://www.sedlabanki.is/
More information through EDIRC
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.:
- James Breece & Vincenzo Cassino, 1998. "The Forecasting and Policy System: demand-side satellite models," Reserve Bank of New Zealand Discussion Paper Series G98/3, Reserve Bank of New Zealand.
- Caballero, Ricardo J., 1999.
Handbook of Macroeconomics,
in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 12, pages 813-862
- Cabalero, R.J., 1997. "Aggregaete Investment," Working papers 97-20, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ricardo J. Caballero, 1997. "Aggregate Investment," NBER Working Papers 6264, National Bureau of Economic Research, Inc.
- Caggese, Andrea, 2007. "Financing constraints, irreversibility, and investment dynamics," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 2102-2130, October.
- Andrea Caggese, 2001. "Financing Constraints, Irreversibility, and Investment Dynamics," Working Papers 53, Barcelona Graduate School of Economics.
- Andrea Caggese, 2003. "Financing Constraints, Irreversibility, and Investment Dynamics," FMG Discussion Papers dp440, Financial Markets Group.
- Andrea Caggese, 2003. "Financing constraints, irreversibility, and investment dynamics," LSE Research Online Documents on Economics 24828, London School of Economics and Political Science, LSE Library.
- Andrea Caggese, 2001. "Financing constraints, irreversibility and investment dynamics," Economics Working Papers 1008, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 2006.
- Andrew Benito & Garry Young, 2003. "Hard Times or Great Expectations? Dividend Omissions and Dividend Cuts by UK Firms," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 531-555, December.
- Andrew Benito & Garry Young, 2001. "Hard Times or Great Expectations?: Dividend omissions and dividend cuts by UK firms," Bank of England working papers 147, Bank of England.
- Benito, Andrew & Garry Young, 2002. "Hard Times or Greatr Expectations?: Dividend Omissions and Dividend Cuts by UK Firms," Royal Economic Society Annual Conference 2002 21, Royal Economic Society.
- Caballero, Ricardo J, 1994. "Small Sample Bias and Adjustment Costs," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 52-58, February.
- Colin Ellis & Simon Price, 2003. "UK business investment: long-run elasticities and short-run dynamics," Bank of England working papers 196, Bank of England.
- Ellis, Colin & Simon Price, 2003. "UK Business Investment: Long-Run Elasticities and Short-Run Dynamics," Royal Economic Society Annual Conference 2003 73, Royal Economic Society.
- Colin Ellis & Simon Price, 2004. "UK business investment: long-run elasticities and short-run dynamics," Money Macro and Finance (MMF) Research Group Conference 2003 27, Money Macro and Finance Research Group.
- Bean, Charles R, 1981. "An Econometric Model of Manufacturing Investment in the UK," Economic Journal, Royal Economic Society, vol. 91(361), pages 106-121, March.
- Nobuhiro Kiyotaki, 1998. "Credit and Business Cycles," The Japanese Economic Review, Japanese Economic Association, vol. 49(1), pages 18-35, 03. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ice:wpaper:wp27_bjorn. 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: (Central Bank of Iceland)
If references are entirely missing, you can add them using this form.