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Equipment expenditures since 1995: the boom and the bust

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  • Jonathan McCarthy

Abstract

Business investment in equipment surged in the 1990s, then fell back sharply after mid-2000. A popular explanation of these trends holds that the soaring stock market and declining computer prices of the last decade encouraged excess investment, setting the stage for the retrenchment that followed. Yet an analysis of the factors underlying investment suggests that capital spending patterns in the late 1990s would have been quite similar had stock values and equipment prices remained near their recent historical averages.

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Bibliographic Info

Article provided by Federal Reserve Bank of New York in its journal Current Issues in Economics and Finance.

Volume (Year): 7 (2001)
Issue (Month): Oct ()
Pages:

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Handle: RePEc:fip:fednci:y:2001:i:oct:n:v.7no.9

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Keywords: Capital investments ; Forecasting;

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  1. Robert S. Chirinko, 1992. "Business Fixed Investment Spending: A Critical survey of Modeling Strategies, Empirical Results, and Policy Implications," Working Papers 9213, Harris School of Public Policy Studies, University of Chicago.
  2. Gilchrist, Simon & Himmelberg, Charles P., 1995. "Evidence on the role of cash flow for investment," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 541-572, December.
  3. Stacey Tevlin & Karl Whelan, 2000. "Explaining the investment boom of the 1990s," Finance and Economics Discussion Series 2000-11, Board of Governors of the Federal Reserve System (U.S.).
  4. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
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