Aggregate business fixed investment
An aggregate business fixed investment error correction model (ECM) is estimated with Icelandic data. The user cost of capital increased considerably in the 1980s as capital markets in Iceland were liberalised and interest rates were adjusting. From the 1990s and onwards, however, the user cost has...
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ftrepec:oai:RePEc:ice:wpaper:wp27_bjorn 2024-04-14T08:13:33+00:00 Aggregate business fixed investment Björn A. Hauksson http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=3432 unknown http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=3432 preprint ftrepec 2024-03-19T10:36:11Z An aggregate business fixed investment error correction model (ECM) is estimated with Icelandic data. The user cost of capital increased considerably in the 1980s as capital markets in Iceland were liberalised and interest rates were adjusting. From the 1990s and onwards, however, the user cost has been decreasing steadily. And the relative price of business investment has been downward trending since the 1980s. A high Q ratio over the period portrays an increased demand for capital. The first order condition of capital for profits which is derived for a constant elasticity of substitution production function has minor long-run role for the user cost. Investment and capital, and investment, value added and the user cost do, however, give expected estimates of cointegration coefficients. In the short-run dynamics of the ECM, gearing, Q and profit ratios move with investment. Official figures show an unprecedented capital decrease in the 1990s in Iceland. The possibility of mismeasured technology investment is explored briefly. Report Iceland RePEc (Research Papers in Economics) |
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RePEc (Research Papers in Economics) |
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description |
An aggregate business fixed investment error correction model (ECM) is estimated with Icelandic data. The user cost of capital increased considerably in the 1980s as capital markets in Iceland were liberalised and interest rates were adjusting. From the 1990s and onwards, however, the user cost has been decreasing steadily. And the relative price of business investment has been downward trending since the 1980s. A high Q ratio over the period portrays an increased demand for capital. The first order condition of capital for profits which is derived for a constant elasticity of substitution production function has minor long-run role for the user cost. Investment and capital, and investment, value added and the user cost do, however, give expected estimates of cointegration coefficients. In the short-run dynamics of the ECM, gearing, Q and profit ratios move with investment. Official figures show an unprecedented capital decrease in the 1990s in Iceland. The possibility of mismeasured technology investment is explored briefly. |
format |
Report |
author |
Björn A. Hauksson |
spellingShingle |
Björn A. Hauksson Aggregate business fixed investment |
author_facet |
Björn A. Hauksson |
author_sort |
Björn A. Hauksson |
title |
Aggregate business fixed investment |
title_short |
Aggregate business fixed investment |
title_full |
Aggregate business fixed investment |
title_fullStr |
Aggregate business fixed investment |
title_full_unstemmed |
Aggregate business fixed investment |
title_sort |
aggregate business fixed investment |
url |
http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=3432 |
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Iceland |
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Iceland |
op_relation |
http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=3432 |
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1796311556693164032 |