IDEAS home Printed from https://ideas.repec.org/p/mit/worpap/428.html
   My bibliography  Save this paper

Investment and Sales; Some Empirical Evidence

Author

Listed:
  • Andrew B. Abel
  • Olivier H. Summers

Abstract

This paper attempts to give a structural interpretation to the distributed lag of sales on investment at the two-digit level in US manufacturing. It first presents a simple model which captures the various sources of lags and their respective implications. It then estimates the model, using both data on investment and sales as well as direct evidence on the sources of lags. The spirit of the paper is exploratory ; the model is used mainly as a vehicle to construct, present and interpret the data. We find that the following model can roughly generate the distributed lag structure found in the data. Firms face delivery lags of 3 quarters. They also face adjustment costs, which lead them to take into account expected future sales, with discount factor -9 when constructing the desired capital stock, and to close about 5% of the gap between actual and desired capital per quarter. They pay for orders at a constant rate between the time of order and that of delivery. The model is however not very successful in explaining differences in dynamics across sectors.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Andrew B. Abel & Olivier H. Summers, 1986. "Investment and Sales; Some Empirical Evidence," Working papers 428, Massachusetts Institute of Technology (MIT), Department of Economics.
  • Handle: RePEc:mit:worpap:428
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bhaumik, Sumon Kumar & Das, Pranab Kumar & Kumbhakar, Subal C., 2012. "A stochastic frontier approach to modelling financial constraints in firms: An application to India," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1311-1319.
    2. Tsoukalas, John D., 2011. "Time to build capital: Revisiting investment-cash-flow sensitivities," Journal of Economic Dynamics and Control, Elsevier, vol. 35(7), pages 1000-1016, July.
    3. Gómez, Miguel García-Posada, 2018. "Credit constraints, firm investment and growth: evidence from survey data," Working Paper Series 2126, European Central Bank.
    4. Petya Koeva Brooks, 2001. "Time-To-Build and Convex Adjustment Costs," IMF Working Papers 01/9, International Monetary Fund.
    5. Demir, FIrat, 2009. "Financial liberalization, private investment and portfolio choice: Financialization of real sectors in emerging markets," Journal of Development Economics, Elsevier, vol. 88(2), pages 314-324, March.
    6. Wang, Yizhong & Chen, Carl R. & Huang, Ying Sophie, 2014. "Economic policy uncertainty and corporate investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 227-243.
    7. Giorgio Calcagnini & Germana Giombini & Enrico Saltari, 2009. "Firms’ Investment in the Presence of Labor and Financial Market Imperfections," Working Papers 0901, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2009.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mit:worpap:428. 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: (Linda Woodbury). General contact details of provider: http://edirc.repec.org/data/edmitus.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.