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Econometric Analysis of Sectoral Investment in Belgium (1956–1982)

Published online by Cambridge University Press:  17 August 2016

M. Gerard  and
C. Vanden Berghe
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Abstract

That article is part of an investigation on investment behaviour in Belgium both at aggregate and sectoral level. More precisely it aims to test the hypothesis that investors become more sensitive to expectations regarding future sales opportunities when the economic conditions are going down. Consequently the relative weight of that determinant of investment with respect to the so called notional determinant, i.e. here the real cost of capital, increases when business conditions deteriorate.

Indeed the application of standard investment functions, like the Jorgenson one – see a.o. Hall and Jorgenson (1971) – or the one due to Eisner and Nadiri (1968), to Belgian data suggests that the estimated coefficients not only vary from one sector to another but also strongly depend on the period on which they are estimated. However some economic logic seems to arise from that instability.

Therefore, in order to obtain more accurate predictions regarding the effects of a change in the cost of capital, e.g. a change in the interest rate or in tax parameters, or of a change in expected demand, a methodology is needed which captures that variability of the coefficients of the investment functions.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 50 , Issue 1-2 , 1984 , pp. 89 - 118
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1984 

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Footnotes

(1)

The authors work at the Department of Economics, ICHEC, Blvd Brand Whitlock 2 – 1150 Bruxelles; M. Gérard is also at HEC Liège and affiliated to the Faculties of Namur; C. Vanden Berghe was previously at the Department of Economics, University of Louvain.

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