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The q theory of investment under unit root tests

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  • David De la Croix
  • O. Licandro

Abstract

We test a q investment model for Belgium using a multivariate cointegration approach. The introduction of the degree of capacity utilization duc, in addition to investment and average q, is necessary to determine the cointegration space. This supports the idea that marginal q differs from average q by a factor which is a function of duc, as suggested by Licandro (1992).
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Suggested Citation

  • David De la Croix & O. Licandro, 1993. "The q theory of investment under unit root tests," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 139, pages 329-339.
    • Handle: RePEc:bxr:bxrceb:2013/12891
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    References listed on IDEAS

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    1. repec:adr:anecst:y:1992:i:27:p:04 is not listed on IDEAS
    2. Omar Licandro, 1992. "Investment Dynamics and Capacity Utilization under Monopolistic Competition," Annals of Economics and Statistics, GENES, issue 27, pages 91-113.
    3. Abel, Andrew B & Blanchard, Olivier J, 1986. "The Present Value of Profits and Cyclical Movements in Investment," Econometrica, Econometric Society, vol. 54(2), pages 249-273, March.
    4. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-224, January.
    5. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    6. Edmond Malinvaud, 1987. "Capital productif, incertitudes et profitabilité," Annals of Economics and Statistics, GENES, issue 5, pages 1-36.
    7. repec:adr:anecst:y:1987:i:5:p:01 is not listed on IDEAS
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Paper 1227, Economics Department, Queen's University.
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    Cited by:

    1. Verschueren, Frederic, 2000. "Co-integration inference in the value-profit relation and investment models," Economics Letters, Elsevier, vol. 69(3), pages 289-297, December.

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