TY  - JOUR
AU  - Abel,Andrew B.
AU  - Blanchard,Olivier J.
TI  - The Present Value of Profits and Cyclical Movements in Investment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 1122
PY  - 1987
Y2  - August 1987
UR  - http://www.nber.org/papers/w1122
L1  - http://www.nber.org/papers/w1122.pdf
N1  - Author contact info:
Andrew B. Abel
Wharton School
University of Pennsylvania
2315 Steinberg Hall - Dietrich Hall
Philadelphia, PA  19104-6367
Tel: 215/898-4801
Fax: 215/573-7244
E-Mail: abel@wharton.upenn.edu

Olivier J. Blanchard
International Monetary Fund
Economic Counsellor and Director
Research Department
700 19th Street, NW
Rm. 10-700
Washington DC, 20431
Tel: 202-623-7825
Fax: 202-623-7271
E-Mail: blanchar@mit.edu
AB  - Most of the empirical work on investment is based on the existence of a relation between investment and the expected present val of marginal profits.Thus, in this paper we compute such a present value series, under various assumptions about demand and technology and examine its relation to investment.We find that variations in this present value series are, surprisingly,due more to variations in the cost of capital than to variations in marginal profit. We also find that the present value series, although significantly related to investment, still leaves unexplained a large, serially correlated fraction of investment.
ER  -