Production Of Investment Goods Research Articles

The impacts of imports and trade liberalization in Brazil: Insights from an aggregate cost function

AbstractBrazil has faced and continues to struggle with difficult economic challenges, including achieving noninflationary economic growth and a manageable external deficit. This paper presents the results of the estimation of an aggregate translog cost function with inputs of domestic capital and labor and imports and outputs of consumption and investment goods. The resulting calculated elasticities give insights into the relationships among the inputs, as well as the possible impacts of further reducing international trade barriers. The findings suggest that all of the inputs are substitutes for one another and that an increase in imports may have at least short‐run negative effects on the demand for domestic capital and labor. However, imports appear to be particularly important in the production of investment goods, so an increase in imports may result in a more than proportionate increase in the output of those products and enhance the long‐term growth of the economy. The responses to current challenges facing Brazil will affect its future economic growth as well as have a broader impact on the international scene. The results described here may help to inform policy makers as they address these issues, particularly with respect to international trade policies.

Agency costs and business cycles

This paper develops a model with endogenous agency costs that is otherwise quite similar to the canonical real business cycle model. The traditional assumption in the literature is that these agency costs arise in the production of investment goods. In contrast, this paper assumes that these costs are all encompassing in the sense that they arise in the production of aggregate output. The paper explores both the importance of the investment vs. output assumption for business cycle dynamics, and the conditions under which these agency models can deliver amplification and/or persistence. The paper has two principal conclusions. First, in terms of amplification and propagation, the output model performs worse than does the investment model. This arises because a variable distortion in the investment market has more of an impact than a comparable distortion in the output market. Second, in this model with optimal consumption choice by entrepreneurs, there is a clear tension between amplification and persistence.

Cantillon and Ricardo effects: Hayek's contributions to business cycle theory

The distinctive line of argument in Hayek' business cycle theory can be characterized as a combination of the Cantillon effect monetary expansion on the price structure and the Ricardo effect of a shortage of consumption goods on the production of investment goods. This paper compares the original ideas of Cantillon and Ricardo with their adaptation and combination by Hayek. The differences help to expose fundamental problems in Hayek' theory and, more generally, in projects of integrating money and the business-cycle phenomenon with Walrasian general equilibrium theory.

BRITAIN'S MANUFACTURING REVIVAL IS SET TO CONTINUE

The data for the first five months of 1994 have shown an encouraging pick‐up in manufacturing output, which grew only slowly over the course of 1992 and 1993. The production of investment goods has picked up particularly strongly, after declining over the course of last year. That has benefited the engineering industry, which before this recent surge had seen little benefit from the recovery. In this forecast release, we look in more detail at the sources of this improvement in the outlook for manufacturing industry. Last year, manufacturing output was held back by the recession elsewhere in Europe and the weakness of investment. These factors have now become more positive and will sustain a strong manufacturing performance over the remainder of this year and into 1995. These demand side influences are also being assisted by positive developments on the supply‐side of the economy, which should help to sustain the revival of manufacturing industry over the medium term.

An estimation of import demand, export supply and technical change for Korea

This paper estimates import demand and export supply functions for Korea based on the translog restricted profit (or GNP) function. It also estimates biases of technological change and applies decomposition analysis to examine the effects of technical change on input demand within the profit function framework. Our findings show that (a) factor inputs, as well as outputs, are, in general, moderately price-elastic and substitutable among each other. (b) the production of investment goods, as well as export goods, is capital-intensive while the production of consumption goods is labout-intensive, (c) technical change is labour-saving and is biased against imports, and (d) there has been a rapid decline of export supply price-elasticity which may be attributable to the rapid growth of export share of GDP (from 4% in 1964 to 38% in 1983). The larger the relative size of export sector and the faster the rate of its growth, the harder will it be to expand export production by drawing own resources from the dome...

The Time Structure of Investment Behavior in United States Manufacturing, 1947-1960

T HE relationship between investment behavior and its underlying determinants is of critical importance for economic policy. Perhaps even more critical for the timing of economic policy is the time structure of this relationship.' A counter-cyclical policy predicated on the stimulation of investment expenditures requires a relatively short lag between changes in the policy instruments and actual investment. If the lag between policy changes and investment is long, a counter-cyclical policy based on stimulating investment expenditures may have an adverse effect on economic stability. The form of the lag between changes in policy and actual investment is also important for economic policy. If the effects of changes in policy instruments are highly concentrated in time, very precise control of the timing of policy measures is required. If, on the other hand, the effects of policy changes are distributed over very substantial periods of time, less precise control of the timing of economic policy may suffice. Empirical evidence on the average lag between investment and its underlying determinants has been slow in accumulating. Evidence based on sample surveys suggests an average lag between the determinants of investment and actual investment expenditures in United States manufacturing of seven quarters.2 Evidence based on regression studies of annual observations of investment expenditures suggests lags ranging from 25 to 50 quarters or more,3 while examination of quarterly observations suggests lags of six to ten quarters.4 The findings from quarterly data conflict with findings from annual data but coincide with survey results. Empirical evidence on the form of the lag distribution underlying investment behavior has accumulated even more slowly than evidence on the average lag. Most studies of investment begin with an a priori specification of the form of the lag distribution. This specification restricts the class of possible lag distributions severely Koyck [9] employs a geometric lag distribution, Solow [12] has proposed the Pascal lag distribution for this purpose, and deLeeuw [2] uses an inverted-V shaped distribution. Each of these classes of lag distributions has the undesirable property that it is impossible to approximate an arbitrary lag distribution by a member of the class. While evidence is available on the average lag resulting from the application of a given lag distribution, almost no evidence is available on the form of the distribution that should be employed. To obtain such evidence, a class of lag distributions that can approximate an arbitrary lag distribution must be used. Our first objective is to estimate the average lag between the determinants of investment behavior and actual investment expenditures. Our second objective is to characterize the form of the lag distribution. For these purposes we employ empirical results from a study of investment behavior in United States manufacturing.5 Quarterly data on investment exinvestment expenditures for 15 sub-industries penditures appear to be essential for a detailed study of this lag distribution. Our empirical results are based on quarterly observations on 1 A comprehensive discussion of the timing of economic policy is provided by Ando, Brown, Solow, and Kareken [1]. For a discussion of fixed investment, see especially pp. 2 5-38. 2See Mayer [11]. 'See Kuh [10], especially pp. 7-21 and 293-302. Kuh cites the results of Grunfeld [41 and Koyck [9], which are similar to his own. 4See Jorgenson [5 and 6]. Kareken and Solow [1] have studied lags between the determinants of investment and new orders and between new orders and production of investment goods using quarterly data. Their results are