Working Paper: NBER ID: w0716
Authors: Ray C. Fair
Abstract: Feldstein argues in his Fisher-Schultz Lecture that he has found, by accounting for inflation and taxes, large and significant rate of return effects on investment. His results are interesting because they seem to be robust to alternative specifications of the investment equation. Feldstein has clearly not exhausted all possible specifications of the investment equation, and this comment reports on results, using Feldstein's data, for one alternative specification. The results do not support Feldstein's conclusion. The data do not appear to contain enough information to decide the issue of the quantitative effect of the cost of capital on investment.
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JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| excess capital (E22) | net return (D33) |
| net return (D33) | investment (G31) |
| excess capital (E22) | investment (G31) |
| net return (D33) | excess capital (E22) |