Long-Term Risks to Investment Recovery

Philip Arestis and Elias Karakitsos

Chapter 6 in The Post ‘Great Recession’ US Economy, 2010, pp 120-149 from Palgrave Macmillan

Abstract: Abstract Real gross private domestic investment, or simply investment, consists of residential and non-residential investment. The latter is usually referred to as business investment and includes office buildings, factory plants, equipment and inventories. Business investment plays a key role in business cycle analysis; it also holds the key to growth as it affects the capital stock in the economy and therefore capacity as well as long-term multi-factor productivity. A higher investment rate increases the capital stock in the economy and lifts (multi-factor) productivity. This increases the rate of growth of potential output and enables the economy to grow faster without producing higher inflation. Countries with fast growth have a high savings ratio and therefore a high investment to GDP ratio; and vice versa. In this chapter we analyse the long-term factors that affect investment.

Keywords: Business Cycle; Capacity Utilisation; Great Recession; Debt Level; Unit Labour Cost (search for similar items in EconPapers)
Date: 2010
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Chapter: Long-term Risks to Investment Recovery (2004)
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DOI: 10.1057/9780230276109_6

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