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Integrating Tobin's Q with Goodwin's Nonlinear Accelerator

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  • Joao Ricardo Faria

Abstract

This paper derives an optimal investment function that combines Tobin's q with Goodwin's nonlinear accelerator. It provides microfoundations to the backward looking behaviour of investment in Goodwin's model, and simultaneously allows the study of Tobin's q into a business cycle model.

Suggested Citation

  • Joao Ricardo Faria, 2000. "Integrating Tobin's Q with Goodwin's Nonlinear Accelerator," Working Paper Series 104, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:wpaper:104
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    File URL: http://www.finance.uts.edu.au/research/wpapers/wp104.pdf
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    References listed on IDEAS

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    1. Gilchrist, Simon & Himmelberg, Charles P., 1995. "Evidence on the role of cash flow for investment," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 541-572, December.
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    4. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    5. Sasakura, Kazuyuki, 1996. "The business cycle model with a unique stable limit cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1763-1773.
    6. João Faria & Joaquim Andrade, 1998. "Investment, credit, and endogenous cycles," Journal of Economics, Springer, vol. 67(2), pages 135-143, June.
    7. Steigum, Erling, Jr, 1983. "A Financial Theory of Investment Behavior," Econometrica, Econometric Society, vol. 51(3), pages 637-645, May.
    8. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    9. Feichtinger, Gustav & Novak, Andreas & Wirl, Franz, 1994. "Limit cycles in intertemporal adjustment models : Theory and applications," Journal of Economic Dynamics and Control, Elsevier, vol. 18(2), pages 353-380, March.
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    More about this item

    Keywords

    investment; business cycles; tobin's q;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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