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Testing for secular stagnation in investment rates using a Bayesian multilevel model

Ilan Strauss and Jangho Yang

Structural Change and Economic Dynamics, 2024, vol. 70, issue C, 351-364

Abstract: Following Hansen (1939), we use a Bayesian multilevel (‘mixed effects’) model on a large firm-level panel to isolate the secular decline in autonomous investment demand and test for causes of it. Our firm-level regression shows that the investment slowdown is a long-standing feature across firms in 21 advanced economies since 1998 and continuing until the present (2020). Using a group-level (‘macro’) regression, we try to explain firms’ estimated secular decline in autonomous investment demand. We find that a shortage of relative investment opportunities – as per the original secular stagnation thesis – explains 40% of the variation in this secular slowdown.

Keywords: Secular stagnation; Investment rates; Firm-level data; Tobin’s Q; Bayesian econometrics (search for similar items in EconPapers)
JEL-codes: D22 D25 E22 E27 F23 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:70:y:2024:i:c:p:351-364

DOI: 10.1016/j.strueco.2024.03.011

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