The Contribution of Equipment Leasing in the Error-Correction Model of Investment in Machinery and Equipment: Evidence from Italy
Applied Econometric and International Development, Vol. 9, No. 2, pp. 87-96, 2009
Posted: 28 Dec 2009 Last revised: 5 Jan 2010
Date Written: December 28, 2009
Several studies have shown a positive correlation between investment in machinery and equipment (M&E) and economic growth. For this reason, it is very important for policy-makers to study the dynamics of investments and their expected evolution over time through forecast scenarios. The paper aims to present an error-correction model of investment in machinery and equipment at current price with a focus on the contribution of equipment leasing. The main empirical results of the model with equipment leasing as exogenous show that the variable explains 96% of the investment variability and, that as leasing grows by 1 percentage point, investment grows by 0.3%; the elasticity is reduced to 0.2 in the model with all the exogenous variables taken into account (the equipment leasing, the demand (sum of consumptions and exports), the long-term interest rate and the industrial production index).
Keywords: Equipment Leasing, Error-Correction Model, Investment in Machinery and Equipment, Unit Root and (co-)Integration Tests
JEL Classification: C1, C2, C51, E22, E31
Suggested Citation: Suggested Citation