Quarterly Business Capital Expenditures

This study explains the theory and empirical experiments underlying the two business fixed capital expenditure equations used in RDX1, an aggregate quarterly model of the Canadian economy. Econometric descriptions of behaviour are never final, even when the behaviour in question is fairly straightforward. In the field of investment behaviour, where decision makers and researchers alike operate under conditions of considerable uncertainty, almost any equation must be regarded as a stopgap whose use is only justified under the pretext that it is temporary. Even while research is continuing it often makes sense to stop and chronicle the progress to date, in part to help others on the same route and in part to clarify the remaining problems. When one must produce some equation or other in a specified time, as we had to do for the RDX1 model, there is an added incentive to spell out progress to date so that the equation can be duplicated for the aggregate model. Details