I=I(r)

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Fri, 25 Jan 2002 21:41:43 +0100 (CET), srl
<larson@xxxxxx> wrote:

>I agree that investment should be high, but this has nothing to do
>with interest rates. There is no scientific study anywhere - and
>I've looked for a while now - that proves ANY kind of correlation
>between investments and interest rates. The I=I(r) is one of the most
>persistent macroeconomic myths in our world. The correct one is of
>course I=I(AD), with appropriate periodicity in denotations.

Keynes GT argument was I=I(E[AD],i), of course.  But if policy
is engaged in i=f(Y) when Y=f(Y,I) you do have an awful mess
in sorting out causal relationships from statistical aggregates.
Are there scientific studies such as case studies on investment
decisions within firms that permit a direct look at the causal
relationship without requiring us to read statistical tea leaves
in a maelstrom of intercorrelations?



Virtually,

Bruce McFarling, Shortland, NSW
ecbm@xxxxxxxxxxxxxxxxxxx