Interpreting estimation results of Euler equation investment models when factor markets are imperfectly competitive
In this paper the standard Euler equation investment model with imperfectly competitive product markets is extended for imperfectly competitive structures on the factor markets: labour markets and markets for investment goods. This extension leads to two additional explanatory variables in the Euler equation. Although economically reasonable, the resulting equation for a simple reason cannot be estimated: parts of the explanatory variables are perfectly collinear. For estimation purposes at least one of these variables has to be neglected. Neglecting one of the additional variables, the coefficients to be estimated have to be interpreted as linear combinations of the 'true' coefficients. The differences between the 'true' coefficients and the linear combinations are numerically demonstrated.
|Date of creation:||1997|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.zew.de/Email:
More information through EDIRC
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.:
- Lawrence H. Summers, 1981. "Taxation and Corporate Investment: A q-Theory Approach," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(1), pages 67-140.
- Chow, G.C., 1991. "Dynamic Optimization Without Dynamic Programming," Papers 361, Princeton, Department of Economics - Econometric Research Program.
- Chow, Gregory C., 1992. "Dynamic optimization without dynamic programming," Economic Modelling, Elsevier, vol. 9(1), pages 3-9, January.
- Chow, G.C., 1992. "Optimal Control Without Solving the Bellman Equations," Papers 364, Princeton, Department of Economics - Econometric Research Program.
- Bond, Stephen & Meghir, Costas, 1994.
"Dynamic Investment Models and the Firm's Financial Policy,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(2), pages 197-222, April.
- Stephen Bond & Costas Meghir, 1990. "Dynamic Investment Models and the Firm's Financial Policy," CEPR Financial Markets Paper 0013, European Science Foundation Network in Financial Markets, c/o C.E.P.R, 77 Bastwick Street, London EC1V 3PZ..
When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:5131. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.