Please use this identifier to cite or link to this item:
Assarsson, Bengt
Berg, Claes
Jansson, Per
Year of Publication: 
Series/Report no.: 
Sveriges Riksbank Working Paper Series 95
This paper uses a neoclassical investment model extended with installation costs for capital, agency costs for investment financing, and the possibility of the firm being output constrained as a framework for an empirical analysis of investment behaviour in the Swedish manufacturing industry. The theory is implemented within a multivariate error-correction approach on data covering the time period 1951 to 1995, and we gain the following main results: (1) Tobin’s average Q is not the sole determinant of investment, neither in the short nor in the long run, and other variables like real output and capital gearing also affect investment activity; (2) the out-of-sample forecasts of the model track the evolution of actual investment growth quite impressively, especially at short- and medium-term horizons (1-2 years); (3) a relative equity-price variable is shown to constitute a good approximation of average Q, both for empirical modelling in general and forecasting in particular.
Forecasting investment
Multivariate error-correction model
Neoclassical investment theory
Tobin's Q
Document Type: 
Working Paper

Files in This Item:
148.49 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.