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Cyclical Activity and Gestation Lags in Investment*
Author(s) -
Ercolani Joanne S.
Publication year - 2014
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12040
Subject(s) - business cycle , investment (military) , economics , gestation , capital investment , monetary economics , capital (architecture) , macroeconomics , econometrics , finance , pregnancy , geography , biology , genetics , archaeology , politics , political science , law
This paper uses a macroeconomic model of investment behaviour to identify cyclical activity in UK investment. Various cycles are detected and their lengths are estimated. As a new contribution to the business cycle literature, we estimate the gestation lags inherent in investment projects (arising from capital adjustment, buildings construction etc.) that are considered central to the creation of fluctuations in economic activity. We find multiple and statistically significant cycles in our investment series, including a 3.1‐year K itchin cycle, a 9.6‐year J uglar cycle and a 22.2‐year K uznets swing, driven by gestation lags of 1.1 years, 2.4 years and 12 years respectively.