Business Investment in the OECD Economies: Recent Performance and some Implications for Policy

Robert Ford and Pierre Poret
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Robert Ford: OECD
Pierre Poret: OECD

No 88, OECD Economics Department Working Papers from OECD Publishing

Abstract: Investment growth in the OECD area has been higher in the second half of the 1980s than in the 1970s. However, the ratio of net investment to GDP has remained low by past cyclical standards. This paper first reviews the evolution of business-sector fixed investment and addresses measurement issues related to computers and intangible investment. It then examines the determinants of investment and the extent to which governments can and should influence capital formation. Time-series properties of investment, output and the cost of capital do not appear to be consistent with well-established theories of investment. The best predictor of investment is found to be its own past history. Therefore, although higher investment could be beneficial to future consumption and economic growth, the effectiveness of policies to raise investment via the cost of capital is largely uncertain ... La croissance de l'investissement dans les pays de l'OCDE a été plus rapide dans la second moitié des années 80 qu'au cours des années 70. Cependant, l'investissement net en proportion de la production est resté bas par comparaison aux cycles passés. Ce papier tout d'abord retrace l'évolution de l'investissement fixe du secteur des entreprises et traite des problèmes de mesure relatifs aux ordinateurs et aux investissements immatériels. Les propriétés des séries temporelles pour l'investissement, la production et le coût du capital n'apparaissent pas compatibles avec les théories bien établies de l'investissement. Il est estimé que le meilleur prédicteur de l'investissement est son propre passé. Ainsi, bien que davantage d'investissement puisse être favorable à la consommation future et à la croissance économique, l'efficacité des politiques visant à élever l'investissement à travers le coût du capital est largement incertaine ...

Date: 1990-11-01
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