Vito Gala, Joao F. Gomes, Tong Liu (2019), Investment without Q, Journal of Monetary Economics.
Abstract: Policy functions summarize the key predictions of any dynamic investment model. They are easy to estimate and account for a large fraction of the variation in corporate investment. Estimated policy functions can also be used estimate deep parameters of a structural model of investment. Variance decomposition of empirical investment equations can be used to identify the key state variables in structural models.
Description: Policy functions summarize the key predictions of any dynamic investment model. They are easy to estimate and account for a large fraction of the variation in corporate investment. Estimated policy functions can also be used estimate deep parameters of a structural model of investment. Variance decomposition of empirical investment equations can be used to identify the key state variables in structural models.
