K. Cuthbertson et D. Gasparro, FIXED INVESTMENT DECISIONS IN UK MANUFACTURING - THE IMPORTANCE OF TOBINS-Q, OUTPUT AND DEBT, European economic review, 39(5), 1995, pp. 919-941
In a neoclassical intertemporal framework real investment is determine
d by Tobin's marginal-Q. We develop this approach to include both agen
cy costs of debt and regime changes, where in some periods the firm ma
y be demand constrained. This leads to a 'wedge' between marginal and
average-Q and in addition to the latter variable, investment depends a
n capital gearing and output. The model is used to explain UK fixed in
vestment in the manufacturing sector 1968-1990 using an error-correcti
on model and cointegration techniques. The statistical performance of
the model, including parameter stability is satisfactory.