The Asset Price and Investment Technology

유진아

The Asset Price and Investment Technology

Journal of Insurance and Finance
2010, 21(2), pp.175-215
Publisher : Korea Insurance Research Institute
Research Area : Social Science > Business Management

유진아 ¹

¹보험연구원

Accredited

ABSTRACT

This paper evaluates the importance of investment installment costs in a sticky price model by comparing two different adjustment cost specification:one depends upon investment-to-capital stock ratio, and the other depends upon investment growth. The two specifications are considered since the former has been adopted in the empirical literatures and the latter has been adopted in the theoretical literatures. The adjustment cost specifications affects the relationship between asset price and value of capital stock, and also the dynamic process of investment and output. When the installment cost depends upon the investment growth, there is a stronger positive asset price response to a positive technology shock. In addition the investment growth specification generates a hump-shaped response of investment and output, that is frequently observed in the empirical literatures.

KEYWORDS

Asset price, Average q, Investment adjustment costs, Marginal q

Citation status

* References for papers published after 2023 are currently being built.

[report] Altig D. / 2005 / Firm-Specific Capital, Nominal Rigidities and The Business Cycle / NBER

[journal] Blanchard, O. / 1993 / The Stock Market, Profit and Investment / The Quarterly Journal of Economics 108 : 115~136

[report] Boldrin, M. / 2000 / Habit Persistence, Asset Returns and the Business Cycle / FRB of Minneapolis

[report] Carlstrom, C.T. / 2003 / Investment and Interest Rate Policy: A Discrete Time Analysis / FRB of Cleveland

[journal] Chirinko, R. S. / 1994 / Economic Fluctuation, Market Power and Returns to Scale: Evidence from Firm-Level Data / Journal of Applied Econometrics 9 : 47~69

[book] Christiano, L.J. / 2004 / Firm Specific Capital and Aggregate Inflation Dynamics in Woodford’s Model / manuscript

[report] Christiano, L. J. / 2003 / Stock Market and Investment Goods Prices: Implications for Macroeconomics / NBER

[journal] Christiano L.J. / 2005 / Nominal Rigidities and the Dynamic Effects of a shock to Monetary policy / Journal of Political Economy 113 : 1~45

[report] De Paoli B. / 2009 / Asset pricing implications of New Keynesian model / Bank of England

[journal] Dupor, W. / 2001 / Investment and Interest Rate Policy / Journal Economic Theory : 85~113

[book] Dupor, W. / 2002a / Nominal Price versus Asset Price Stabilization / manuscript

[journal] Dupor, W. / 2002 / The Natural Rate of Q / American Economic Review 2 : 96~101

[journal] Dupor, W. / 2005 / Stabilizing non-fundamental asset price movements under discretion and limited information / Journal of Monetary Economics 52 : 727~747

[journal] Galeotti M. / 1991 / Generalized Q Models for Investment / The Review of Economics and Statistics 73 : 383~392

[journal] Gilchrist S. / 1995 / Evidence on the role of cash flow for investment / Journal of Monetary Economics 36 : 541~572

[journal] Hayashi, Fumio / 1982 / Tobin’s Marginal q and Average : A neoclassical Interpretation / Econometrica 50 : 213~224

[journal] Ireland, P.N. / 2004 / A Method for Taking Models to the Data / Journal of Economic Dynamics and Control 28 : 1205~1226

[report] Sveen, T. / 2004 / Pitfalls in the modeling of forward-Looking Price Setting and Investment Decisio / Univ. of Pompeu Fabra

[book] Woodford, M. / 2004 / Inflation and Output Dynamics with Firm Specific Investment / manuscript

[journal] Yun, Tack / 1996 / Nominal Price Rigidity, Money Supply Endogeneity, and Business Cycles / Journal of monetary economics 37 : 345~370

This paper was written with support from the National Research Foundation of Korea.

KJCKorea
Journal Central

Journal of Insurance and Finance 2023 KCI Impact Factor : 0.59