The flexible accelerator model of investment: An application to Ugandan tea-processing firms
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Twine, E.E., Kiiza, B. and Bashaasha, B. 2015. The flexible accelerator model of investment: An application to Ugandan tea-processing firms. African Journal of Agricultural and Resource Economics 10(1):1-15.
Permanent link to cite or share this item: http://hdl.handle.net/10568/68572
External link to download this item: http://www.afjare.org/resources/issues/vol_10_no1/1.Twine%20et%20al.pdf
The study uses the flexible accelerator model to examine determinants of the level and growth of investment in machinery and equipment for a sample of tea-processing firms in Uganda. Using a dynamic panel data model, we find that, in the long run, the level of investment in machinery and equipment is positively influenced by the accelerator, firm-level liquidity, and a favourable investment climate in the country. Depreciation of the exchange rate negatively affects investment. We conclude that firm-level strategies that increase output and profitability, and a favourable investment policy climate, are imperative to the growth of the tea industry.
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