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Classical Theory of Investment: Panel Cointegration Evidence From 13 EU Countries

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  • Constantinos Alexiou
  • Persefoni Tsaliki
  • Lefteris Tsoulfidis

Abstract

In the realm of macroeconomic theory, it is well established that investment decisions play an instrumental role in the determination of the level of output and employment; nevertheless, little progress has been made in relation to the theoretical aspects of these decisions. This paper, inspired by the classical approach to capital accumulation as well as the Keynesian theory of effective demand, attempts to enhance our empirical understanding of what determines investment decisions by exploring profitability, financial as well as demand factors. In so doing, a ‘Fully Modified OLS’ panel cointegration framework, for a cluster of two distinct groups of EU countries classified as core and the peripheral economies, provides the platform upon which our econometric investigation takes place. The respective evidence generated from the estimation process is in line with the theoretical framework proposed in this paper.

Suggested Citation

  • Constantinos Alexiou & Persefoni Tsaliki & Lefteris Tsoulfidis, 2016. "Classical Theory of Investment: Panel Cointegration Evidence From 13 EU Countries," Contributions to Political Economy, Cambridge Political Economy Society, vol. 35(1), pages 39-56.
    • Handle: RePEc:oup:copoec:v:35:y:2016:i:1:p:39-56.
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    File URL: http://hdl.handle.net/10.1093/cpe/bzw004
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    Cited by:

    1. George Saridakis & Constantinos Alexiou & Roger Hoseinc & Nirvana Satnarine-Singhc, 2022. "Hegemonic Sanctions and Global Economic Ramifications in the Context of the Russian-Ukrainian Conflict: A Commentary," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 72(1-2), pages 34-55, January-J.
    2. Alexiou, Constantinos & Trachanas, Emmanouil, 2020. "Predicting post-war US recessions: A probit modelling approach," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 210-219.
    3. Alexiou, Constantinos, 2022. "Evaluating the falling rate of profit in the context of the UK economy," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 84-94.

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