Showing papers on "Physical capital published in 1969"

The Measurement of U.S. Real Capital Input, 1929-1967

Abstract: The purpose of this paper is to develop methods for the measurement of real capital input. These methods are based on perpetual inventory estimates of capital stock and corresponding estimates of capital service prices. Stocks and service prices are adjusted for relative utilization of capital. The resulting estimates represent a separation of income from capital into price and quantity components. Estimates of capital input in current and constant prices are constructed for corporate business, non-corporate business, and households and non-profit institutions in the United States for the period 1929–1967. These estimates are prepared in a form suitable for integration into the U.S. National Income and Product Accounts.

Optimal Capital Accumulation by an Economy Facing an International Capital Market

Abstract: In an earlier paper (Hamada, 1966), the author investigated the optimal capital accumulation policy of an open economy which faces a perfect international capital market. There it was assumed that the external interest rate is constant regardless of the amount the country borrows or lends. This assumption can be justified so long as the country is small compared to the world capital market. Actually, however, there are many situations where the rate of interest does depend upon the amount of debt (or lending). In this paper we shall consider the optimal borrowing (lending) and accumulation policy of an economy which faces an imperfectly competitive capital market.' It would be natural to assume that the rate of interest is an increasing function of the amount of international debt, or a decreasing function of the amount of international credit. However, if the world economy and the world capital market are expanding at the same rate as the national economy under consideration, a proportionate increase of the international debt may not affect the rate of interest. In this paper, we shall consider, for simplicity, the case in which the rate of interest depends on the amount of per capita indebtedness of a country. Another purpose of this paper is to make more realistic the assumption on initial conditions which was imposed in my earlier paper (Hamada, 1966). In that paper, at the initial point, the net wealth of a country was given, instead of the values of domestic and foreign capital stock. This assumption led to the uneasy optimal path on which it was necessary for the country to increase or decrease its indebtedness instantaneously at the initial point. In this paper, both initial capital stock and initial indebtedness

A Stock-Adjustment Analysis of Capital Movements: The United States-Canadian Case

Abstract: Traditionally, international capital movements are considered to flow from a country with low interest rates to a country with high interest rates. This mechanistic view of capital movements is essentially the hypothesis tested by Bell (1962) in his paper for the Joint Economic Committee, where portfolio capital movements are shown to be insensitive to interestrate differentials. In this hypothesis there is no possibility for capital to move from a country with high interest rates to a country with low interest rates. Such a movement, which is usually called a "perverse" movement, is treated as an exception to the hypothesis. A logical extension of the hypothesis is that capital movements will continue until interest rates are equalized everywhere. This is, however, inconsistent with observable facts; and only with the introduction of differential risk premiums ex post can the existence of different interest rates be explained. In this paper a stock-adjustment model of capital movements is proposed. Capital movements are flow movements resulting from stock adjustments made by investors in a world of risk and uncertainty.1 In this stock-adjustment model a capital movement which in the context of a

A Comment on the Modigliani-Miller Cost of Capital Thesis

Abstract: William L. Baldwin and Thomas J. Velk [1] point out a basic flaw in the famous Modigliani-Miller cost of capital thesis [2]. The purpose of this article is to show that the flaw, while clearly present, can be repaired and that the M-M conclusions are not affected. The M-M thesis basically asserts that two firms cannot have different market values simply by reason of different financial structures. Using the M-M formulation, consider two firms for which the expected return is the same, X. Both firms are of the same risk class; that is, the random variable X representing the distribution of possible earnings before interest on any debt is the same for both. Company 1 is financed entirely by stock S1, and Company 2 by stock S2 and debt D2. Thus:

Capital-Skill Complementarity: Does capital disaggregation matter?

Abstract: Using Chilean manufacturing plants data, we�find: (1) the elasticity of substitution between capital and skilled labor is lower than the elasticity of substitution between capital and unskilled labor, and (2) the higher the technological component of the capital stock the larger the size of complementarity between capital and skilled labor. Our�findings show that capital, as an aggregate input, may under(over) state the complementarity between labor and the type of capital these workers actually use.

An input-output approach to the study of the flow of funds to agricultural capital markets

Abstract: Agriculture is experiencing an increasing reliance on commercial and governmental sources of capital in order to finance the adoption of new technology and the organizational changes made necessary by that technology. If this trend progresses, it is reasonable to suppose that the interdependence of flows of funds to the farm sector with flows to other sectors will become greater and will become a more important consideration in matters of farm credit policy. In a recent paper, Lee has called for further research into the implications of changes in the financial structure of the farm sector, among them the growth of alternative sources of funds and the changing roles of major lending groups. It is the intent of this paper to suggest a procedure through which the financing of the farm sector can be analyzed as one of a number of economic sectors which are financially interrelated.

A portfolio theory of international short‐term capital movements

Abstract: THIS THESIS APPLIES the theory of portfolio choice to the study of international shortterm capital movements. The first four chapters present a theoretical analysis of the role of private short-term capital movements in the foreign-exchange market. It is shown that under the normal assumptions of portfolio choice, international interestrate differentials will dictate the allocation of a stock, not a flow, of short-term capital. The time path of adjustment of short-term capital placements to a change in interest incentives is considered. The existence of maturity constraints and other factors cause lagged adjustment, thereby tending to blur the short-term distinctions between the stock-adjustment and flow theories. After a transitional period during which the initial stock of capital was reallocated, no further flows would be induced by the given change in interest differentials as longer portfolio sizes are held constant. Differences in risk, convenience yields, etc. among assets in different national money markets may imply a less than perfectly elastic arbitrage schedule. Thus, even in the absence of exchange controls, the induced reallocation of capital might not be sufficient to force the value of the covered differential to zero. Furthermore, it is to be expected that the arbitrage schedule would be nonlinear and may depend upon the absolute level of interest rates as well as upon interest differentials. Within a context of portfolio growth it was found that interest differentials could be said to determine a flow of capital. If interest differentials determine the percentage of portfolios held abroad, then growth in portfolio size will dictate increased absolute amounts of capital held abroad, even at constant interest differentials. Changes in portfolio size or rates of growth an in interest rates will in general be interrelated. If there is an inverse relationship between changes in portfolio size and interest rates, as one would expect in the short run, then the change in effective portfolio size that would accompany a policy decision to change the level of interest rates would reinforce the impact of the interest-rate change on capital movements. It is also shown that, in equilibrium, the trade balance will determine the allocation of a stock rather than a flow of private short-term capital. While trade imbalances are linked by an accounting identity to accompanying short-term capital flows of equal magnitude and opposite direction, these induced flows will in general generate portfolio disequilibrium. When portfolio balance is restored, a change in the trade balance (or in the terms of trade financing) will have led to a change in the allocation of portfolios, but not to a continuing flow. Because of uncovered arbitrage and speculation, the values of the individual components of the covered interest differential (the foreign and domestic interest rates and the forward and spot exchange rates) as well as this composite value may offset the incentives for short-term capital movements. Recognition of the many factors influencing capital movements raises the question, ignored in the existing empirical literature, of how to "identify" and ascertain the quantitative influence of these factors. In Chapter V existing empirical studies of United States short-term capital

Die staatsausgaben in der makroökonomischen produktionsfunktion

Abstract: SUMMARY In this article the author introduces the government investments into a modified Cobb-Douglas production function. These government investments and the corresponding outlays of the private sector of the economy are divided into a public capital stock and a tertiary capital stock (the immaterial capital). These stocks are introduced into the production function in addition to labor and the private capital stock. Then the different time-lags between the income-effect and the capacity-effect are considered. In order to cope with the problems arising from the use of an analysis of regression, empirical investigations generally use the production function in the linearized form, for which the rates of increases are calculated. At the same time the problem of how to find realistic statistical weights (elasticities of production) arises for the new explaining variables. The author proposes two methods and calculates one (hypothetical) example. Following is a discussion of some empirical problems (time-lags, estimations of the capital-stock, elimination of fluctuations in the use of capacity, etc.). The results suggest strongly that the introduction of government investments into the macro-economic production function is useful tool to reduce the residual factor F.

Facts of Life About the Integration of National Capital Markets

Abstract: THE AGENDA calls for a discussion of the obstacles to the integration of National Capital Markets, and it falls upon me to introduce the subject. To start with, I would suggest a slightly different wording, as "facts of life" more than "obstacles" conveys the correct impression as to the kind of difficulties to be met on the road towards integration. Whatever the title, we may wish to deal with the problem under three different headings. First, we have to consider the factors working against integration of Capital Markets on a worldwide basis; second, turning to integration in a regional framework (namely the European Economic Community) we may wonder why progress in this area is still limited; third, and finally, we cannot disregard the development of the so-called Euro-bond market and we have to consider whether it is a satisfactory substitute for genuine integration or not.