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

  • Ines Buono
  • Sara Formai
Chapter
Part of the Financial and Monetary Policy Studies book series (FMPS, volume 46)

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 

JEL classification

E22 C23 

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Copyright information

© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Bank of ItalyDirectorate General for Economics, Statistics and Research, International Relations and Economics DirectorateRomeItaly
  2. 2.Bank of ItalyDirectorate General for Economics, Statistics and Research, Structural Economic AnalysisRomeItaly

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