Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/24250 
Authors: 
Year of Publication: 
1997
Series/Report no.: 
ZEW Discussion Papers No. 97-29
Publisher: 
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim
Abstract: 
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.
Subjects: 
Firm Investment Behaviour
Euler Equation Model
JEL: 
E22
C50
D92
Document Type: 
Working Paper

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