英文教学课件PPT Investment投资

INVESTMENT17IN THIS CHAPTER, YOU WILL LEARN leading theories to explain each type of investment why investment is negatively related to the interest rate things that shift the investment function why investment rises during booms and falls during recessionsTHREE TYPES OF INVESTMENT Business fixed investment:businesses spending on equipment and structures for use in production. Residential investment:purchases of new housing units (either by occupants or landlords). Inventory investment:the value of the change in inventories of finished goods, materials and supplies, and work in progress.U.S. INVESTMENT AND ITS COMPONENTSBillions of 1996 dollars-25002505007501000125015001750200019701975198019851990199520002005Total investmentBusiness fixed investmentResidential investmentChange in inventoriesUNDERSTANDING BUSINESS FIXED INVESTMENT The standard model of business fixed investment: the neoclassical model of investment Shows how investment depends on MPK interest rate tax rules affecting firmsTWO TYPES OF FIRMS For simplicity, assume two types of firms:1. Production firms rent the capital they use to produce goods and services.2.Rental firms own capital, rent it to production firms.In this context, “investment” is the rental firms spending on new capital goods.THE CAPITAL RENTAL MARKETProduction firms must decide how much capital to rent.Recall from Chap. 3:Competitive firms rent capital to the point where MPK = R/P. Kcapital stockreal rental price, R/PKcapital supplycapital demand (MPK)equilibrium rental rateFACTORS THAT AFFECT THE RENTAL PRICEFor the Cobb-Douglas production function, the MPK (and hence equilibrium R/P ) isThe equilibrium R/P would increase if:K (e.g., earthquake or war)L (e.g., pop. growth or immigration)A (technological improvement, or deregulation)1YAKL1RMPKA L KPRENTAL FIRMS INVESTMENT DECISIONS Rental firms invest in new capital when the benefit of doing so exceeds the cost. The benefit (per unit capital): R/P, the income that rental firms earn from renting the unit of capital to production firms.THE COST OF CAPITALComponents of the cost of capital:interest cost: i PK, where PK = nominal price of capitaldepreciation cost: PK, where = rate of depreciationcapital loss: PK (a capital gain, PK 0, reduces cost of K )The total cost of capital is the sum of these three parts:Then, interest cost = depreciation cost = capital loss = total cost =THE COST OF CAPITALExample: car rental company (capital: cars)Suppose PK = $10,000, i = 0.10, = 0.20, and PK/PK = 0.06 Nominal cost of capitalKKKi PPP KKKPPiP$1000$2000 $600$2400THE COST OF CAPITALFor simplicity, assume PK/PK = . Then, the nominal cost of capital equals PK(i + ) = PK(r + ) and the real cost of capital equalsKPrPThe real cost of capital depends positively on: the relative price of capital the real interest rate the depreciation rateTHE RENTAL FIRMS PROFIT RATEA firms net investment depends on its profit rate:Profit rate =KKPPRrMPKrPPPIf profit rate 0, then increasing K is profitableIf profit rate 1, firms buy more capital to raise the market value of their firms. If q cost of capital, then profit rate is high, which drives up the stock market value of the firms, which implies a high value of q. If MPK cost of capital, then firms are incurring losses, so their stock market values fall, so q is low. Market value of installed capitalReplacement cost of installed capitalqTHE STOCK MARKET AND GDPReasons for a relationship between the stock market and GDP:1.A wave of pessimism about future profitability of capital wouldcause stock prices to fallcause Tobins q to fall shift the investment function downcause a negative aggregate demand shockTHE STOCK MARKET AND GDPReasons for a relationship between the stock market and GDP:2.A fall in stock prices wouldreduce household wealthshift the consumption function downcause a negative aggregate demand shockTHE STOCK MARKET AND GDPReasons for a relationship between the stock market and GDP:3.A fall in stock prices might reflect bad news about technological progress and long-run economic growth. This implies that aggregate supply and full-employment output will be expanding more slowly than people had expected.THE STOCK MARKET AND GDPPercent change from 1 year earlierPercent change from1 year earlier-30-20-100102030405019701975198019851990199520002005-6-4-20246810Stock prices (left scale)Real GDP (right scale)ALTERNATIVE VIEWS OF THE STOCK MARKET: THE EFFICIENT MARKETS HYPOTHESIS Efficient Markets Hypothesis (EMH):The market price of a companys stock is the fully rational valuation of the company, given current information about the companys business prospects. Stock market is informationally efficient: each stock price reflects all available information about the stock. Implies that stock prices should follow a random walk (be unpredictable), and should only change as new information arrives. ALTERNATIVE VIEWS OF THE STOCK MARKET: KEYNESS “BEAUTY CONTEST” Idea based on newspaper beauty contest in which a reader wins a prize if he/she picks the women most frequently selected by other readers as most beautiful. Keynes proposed that stock prices reflect peoples views about what other people think will happen to stock prices; the best investors could outguess mass psychology. Keynes believed stock prices reflect irrational waves of pessimism/optimism (“animal spirits”).ALTERNATIVE VIEWS OF THE STOCK MARKET: EMH VS. KEYNESS BEAUTY CONTESTBoth views persist. There is evidence for the EMH and random-walk theory (see p.498). Yet, some stock market movements do not seem to rationally reflect new information. FINANCING CONSTRAINTS Neoclassical theory assumes firms can borrow to buy capital whenever doing so is profitable. But some firms face financing constraints: limits on the amounts they can borrow (or otherwise raise in financial markets). A recession reduces current profits. If future profits expected to be high, investment might be worthwhile. But if firm faces financing constraints and current profits are low, firm might be unable to obtain funds. RESIDENTIAL INVESTMENT The flow of new residential investment, IH , depends on the relative price of housing PH /P. PH /P determined by supply and demand in the market for existing houses. HOW RESIDENTIAL INVESTMENT IS DETERMINEDKH Demand(a) The market for housingSupply and demand for houses determines the equilib. price of houses. SupplyHPPThe equilibrium price of houses then determines residential investment:Stock of housing capitalHOW RESIDENTIAL INVESTMENT IS DETERMINEDKH DemandIHSupply(a) The market for housing(b) The supply of new housingSupplyHPPStock of housing capitalFlow of residential investmentHPPHOW RESIDENTIAL INVESTMENT RESPONDS TO A FALL IN INTEREST RATESKH DemandIHSupplySupplyHPPHPPStock of housing capitalFlow of residential investment(a) The market for housing(b) The supply of new housingTHE TAX TREATMENT OF HOUSING The tax code, in effect, subsidizes home ownership by allowing people to deduct mortgage interest. The deduction applies to the nominal mortgage rate, so this subsidy is higher when inflation and nominal mortgage rates are high than when they are low. Some economists think this subsidy causes over-investment in housing relative to other forms of capital But eliminating the mortgage interest deduction would be politically difficult. INVENTORY INVESTMENTInventory investment is only about 1% of GDP.Yet, in the typical recession, more than half of the fall in spending is due to a fall in inventory investment. MOTIVES FOR HOLDING INVENTORIES1. production smoothingSales fluctuate, but many firms find it cheaper to produce at a steady rate. When sales production, inventories fall. MOTIVES FOR HOLDING INVENTORIES1. production smoothing2. inventories as a factor of productionInventories allow some firms to operate more efficiently. samples for retail sales purposes spare parts for when machines break downMOTIVES FOR HOLDING INVENTORIES1. production smoothing2. inventories as a factor of production3. stock-out avoidanceTo prevent lost sales when demand is higher than expected. MOTIVES FOR HOLDING INVENTORIES1. production smoothing2. inventories as a factor of production3. stock-out avoidance4. work in processGoods not yet completed are counted in inventory. THE ACCELERATOR MODELA simple theory that explains the behavior of inventory investment, without endorsing any particular motiveTHE ACCELERATOR MODEL Notation:N = stock of inventories N = inventory investment Assume:Firms hold a stock of inventories proportional to their outputN = Y, where is an exogenous parameter reflecting firms desired stock of inventory as a proportion of output. THE ACCELERATOR MODELResult: N = Y Inventory investment is proportional to the change in output.When output is rising, firms increase inventories.When output is falling, firms allow their inventories to run down.EVIDENCE FOR THE ACCELERATOR MODELInventory investment (billions of 1996 dollars)Change in real GDP (billions of 1996 dollars)-40-20020406080100-200-10001002003004005001982200120041998198419781996198319671974INVENTORIES AND THE REAL INTEREST RATE The opportunity cost of holding goods in inventory: the interest that could have been earned on the revenue from selling those goods. Hence, inventory investment depends on the real interest rate. Example: High interest rates in the 1980s motivated many firms to adopt just-in-time production, which is designed to reduce inventories.1.All types of investment depend negatively on the real interest rate.2.Things that shift the investment function:Technological improvements raise MPK and raise business fixed investment.Increase in population raises demand for, price of housing and raises residential investment.Economic policies (corporate income tax, investment tax credit) alter incentives to invest. CHAPTER 17 Investmentslide 443.Investment is the most volatile component of GDP over the business cycle.Fluctuations in employment affect the MPK and the incentive for business fixed investment.Fluctuations in income affect demand for, price of housing and the incentive for residential investment. Fluctuations in output affect planned & unplanned inventory investment. CHAPTER 17 Investmentslide 45