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The Relationship between Actual Investment and Survey-based Expectations

Author

Listed:
  • Paul Brennan

    (Reserve Bank of Australia)

  • Tania Milavec

    (Reserve Bank of Australia)

Abstract

Empirical investment models have generally provided a poor explanation of trends in business investment. One reason for this poor performance has been the failure to satisfactorily incorporate expectations. In this paper the usefulness of survey-based expectations is explored. Although these expectations are used extensively in forecasting business investment there has been little study of the systematic relationship between the expectations and actual outcomes. It is found that surprises in short-term interest rates and cyclical factors are the most important quantitative determinants of the relationship between survey expectations and actual outcomes for both construction and equipment investment.

Suggested Citation

  • Paul Brennan & Tania Milavec, 1988. "The Relationship between Actual Investment and Survey-based Expectations," RBA Research Discussion Papers rdp8810, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp8810
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    File URL: https://www.rba.gov.au/publications/rdp/1988/8810.html
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    Cited by:

    1. Malcolm Edey & Jill Pleban, 1991. "Indicators of Economic Activity: A Review," RBA Research Discussion Papers rdp9102, Reserve Bank of Australia.

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