On the long-run equilibrium value of Tobin's average Q

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis note considers Tobin's average Q in a framework where firms finance investment by equities and debt. The determination of its long-run equilibrium value Q o is based on positing equality of the loan rate and, adjusted for a risk premium, the return on equities. Q o can thus be characterized as a ratio of two rates representing the somewhat modified interest costs and profits of the firms. The familiar benchmark value Q o =1 obtains if another condition on the risk premium holds true, which may or may not be the case. An elementary numerical check demonstrates that possible deviations of Q o from unity are not overly dramatic.JEL classification: C 02, D84, E12, E30.

A Pro-cyclical Stock Market under a Counter-cyclical Monetary Policy in a Model of Endogenous Business Cycles

“…The approach used in this section was introduced in the working paper by Franke and Ghonghadze (2014). Here we derive a more general case in which the firms can finance investment by issuing equity or debt (see Franke and Yanovski (2015)). The financing decisions are assumed not to be firm-specific.…”

“…For a discussion on the fundamental value of Tobin's Q for ξ m ̸ = ξ e seeFranke and Yanovski (2015).19 Recall that only the capital stocks of the firms are varying across firms (g j ). In the determination of q f the capital stock growth rate generally plays a very small role because it is present with the same sign both in the denominator and in the numerator of q f .…”

A Supplementary Note on Professor Hein's (2013) Version of A Kaleckian Debt Accumulation

“… In a structuralist post‐Keynesian framework and still at a fairly general level, Franke and Yanovski () characterize the long‐run equilibrium value q o as deviations from unity that, in particular, are determined by a comparison of two independent risk premia. The upshot of their numerical explorations is that q o may typically range between 0.85 and 1.20.…”