The Review of Economics and Statistics Vol. 48 No. 3 1966
Investment by Manufacturing Firms: A Quarterly Time Series Analysis of Industry Data
Abstract
T HIS PAPER considers a variety of theories of investment and attempts to find the importance of each of them. The theories considered fall into several groups. We shall consider these as parts of a single structure of investment which considers both supply and demand. The demand side of the model employs first, the acceleration principle using output, change in output, and expected output as explanatory variables. Next, this side of the model considers the cost of funds using the rate of interest, the flow of internal funds, and the debt-asset ratio. Finally, prices in the factor and product markets are considered. Supply restraints were taken into consideration by using the volume of unfilled orders and by restricting the analysis to the post Korean War period. This model is developed and discussed in the next section of this paper. It is well known that the investment process by an individual firm does not take place instantaneously but that there is a significant lag between the appearance of the need for additional capital goods and the actual investment. The lag structure employed is discussed in the third section of this paper. In the fourth section the data are discussed. This paper fails to find any significant effect on investment of prices or the volume of unfilled orders. All of the output variables and the cost of funds variables are of considerable importance. In particular, the rate of interest, flow of funds and debt asset ratio all play important roles. These empirical results are discussed in the fifth section below. II Theories of Investment Behavior
- DOI
- 10.2307/1927088
- Volume
- 48
- Issue
- 3
- Pages
- 322
- Sources
- openalex crossref