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What Drives Aggregate Investment? Evidence from German Survey Data

Ruediger Bachmann () and Peter Zorn ()

No 4218, CESifo Working Paper Series from CESifo Group Munich

Abstract: The ifo Investment Survey asks firms in the German manufacturing sector about the importance of sales, technological factors, finance, return expectations, and macroeconomic policy for their investment activity in a given year. We show that these subjective investment determinants 1) capture economically what their labels suggest, and 2) have strong explanatory power for aggregate manufacturing investment growth fluctuations. In a second step, we use these determinants to identify aggregate demand and aggregate technology shocks and argue that the bulk of the variance of both aggregate manufacturing investment and output growth fluctuations (as much as approximately two thirds in both cases) is explained by aggregate demand shocks. Consistent with neoclassical views, however, technological factors are the most important investment determinant on average.

Keywords: investment dynamics; investment determinants; survey data; narrative approach; aggregate demand shocks; sentiment shocks (search for similar items in EconPapers)
JEL-codes: D90 D91 E20 E22 E30 E32 (search for similar items in EconPapers)
Date: 2013
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Related works:
Working Paper: What Drives Aggregate Investment? Evidence from German Survey Data (2018) Downloads
Working Paper: What Drives Aggregate Investment? Evidence from German Survey Data (2013) Downloads
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