Weakness in investment growth: Causes, implications and policy responses

Ayhan Kose, Franziska Ohnsorge, Lei Sandy Ye and Ergys Islamaj

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Investment growth in emerging market and developing economies has slowed sharply since 2010. This paper presents a comprehensive analysis of the causes and implications of this slowdown and presents a menu of policy responses to improve investment growth. It reports four main results. First, the slowdown has been broad-based and most pronounced in the largest emerging markets and in commodity exporters. Second, it reflects a range of obstacles: weak activity, negative terms-of-trade shocks, declining foreign direct investment inflows, elevated private debt burdens, heightened political risk, and adverse spillovers from major economies. Third, by slowing capital accumulation and technological progress embedded in investment, weak post-crisis investment growth has contributed to sluggish growth of potential output in recent years. Finally, although specific policy priorities depend on country circumstances, policymakers can boost investment both directly, through public investment, and indirectly, by encouraging private investment, including foreign direct investment, and by undertaking measures to improve overall growth prospects and the business climate.

Keywords: emerging markets; developing economies; investment slowdown; policy space; infrastructure investment; monetary policy; fiscal policy; structural reforms (search for similar items in EconPapers)
JEL-codes: E22 F2 F6 O1 O4 (search for similar items in EconPapers)
Pages: 75 pages
Date: 2017-03
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
https://cama.crawford.anu.edu.au/sites/default/fil ... rge_ye_islamaj_0.pdf (application/pdf)

Related works:
Working Paper: Weakness in Investment Growth: Causes, Implications and Policy Responses (2017)
Working Paper: Weakness in Investment Growth: Causes, Implications and Policy Responses (2017)
Working Paper: Weakness in investment growth: causes, implications and policy responses (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2017-19

Access Statistics for this paper

More papers in CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University Contact information at EDIRC.
Bibliographic data for series maintained by Cama Admin ().