Explaining Weak Investment Growth After the Great Recession: A Macro-Panel Analysis

Ines Buono and Sara Formai ()
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Sara Formai: Directorate General for Economics, Statistics and Research, Structural Economic Analysis

A chapter in International Macroeconomics in the Wake of the Global Financial Crisis, 2018, pp 129-155 from Springer

Abstract: Abstract Business investment could be dampened by weak aggregate demand, the high cost of capital and macroeconomic uncertainty. The importance of each factor may vary both over time and across countries. In this chapter we use a panel of advanced economies to estimate a model of business investment based on the above mentioned factors. The main objective is to understand, through time-varying parameters estimations, how their relative importance has changed over time, in particular after the global financial crisis. The analysis reveals that all three factors matter for investment, and suggests a key role for countercyclical policies aiming at lowering interest rates, supporting aggregate demand, and restoring confidence on financial markets against unfavorable macroeconomic and financial developments, such as those that followed the global financial crisis and the debt crisis.

Keywords: Investment; Uncertainty; Time-varying parameters (search for similar items in EconPapers)
JEL-codes: C23 E22 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:fimchp:978-3-319-79075-6_8

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DOI: 10.1007/978-3-319-79075-6_8

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