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Main drivers of the recent decline in Italy�s non-construction investment

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Listed:
  • Fabio Busetti

    (Bank of Italy)

  • Claire Giordano

    (Bank of Italy)

  • Giordano Zevi

    (Bank of Italy)

Abstract

This paper examines the causes of the exceptionally marked fall in non-construction investment in Italy since 2007. Non-financial private services were the main driver of the decline in the aggregate investment rate, but all sectors weighed in negatively; the reallocation of value added away from industry was a further drag on investment. In concordance with survey findings, an aggregate model of investment indicates that even during the recent double recession the most important driver of capital accumulation was demand conditions. The user cost of capital had a substantial negative impact in the acute phases of the sovereign debt crisis, but since 2013 its contribution has been positive, thanks to the ECB�s expansionary monetary policy. The constraints on capital accumulation imposed by tight credit supply conditions were particularly severe in 2009 and 2012. Finally, uncertainty provided a sizeable drag on investment growth not only during the global financial crisis but also in the last two years. The significance of these determinants of investment is confirmed also by a disaggregated model for the thirteen manufacturing branches.

Suggested Citation

  • Fabio Busetti & Claire Giordano & Giordano Zevi, 2015. "Main drivers of the recent decline in Italy�s non-construction investment," Questioni di Economia e Finanza (Occasional Papers) 276, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_276_15
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    References listed on IDEAS

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    Cited by:

    1. Giordano, Claire & Marinucci, Marco & Silvestrini, Andrea, 2019. "The macro determinants of firms' and households' investment: Evidence from Italy," Economic Modelling, Elsevier, vol. 78(C), pages 118-133.
    2. Antonio De Socio & Enrico Sette, 2018. "Firms’ investments during two crises," Temi di discussione (Economic working papers) 1173, Bank of Italy, Economic Research and International Relations Area.
    3. Balázs Égert, 2021. "Investment in OECD Countries: a Primer," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 63(2), pages 200-223, June.
    4. Gieseck Arne & Largent Yannis, 2016. "The Impact of Macroeconomic Uncertainty on Activity in the Euro Area," Review of Economics, De Gruyter, vol. 67(1), pages 25-52, May.
    5. Ginette Eramo & Roberto Felici & Paolo Finaldi Russo & Federico Signoretti, 2018. "How slow is the recovery of loans to firms in Italy?," Questioni di Economia e Finanza (Occasional Papers) 469, Bank of Italy, Economic Research and International Relations Area.
    6. Claire Giordano & Marco Marinucci & Andrea Silvestrini, 2021. "Forecasting corporate capital accumulation in Italy: the role of survey-based information," Questioni di Economia e Finanza (Occasional Papers) 596, Bank of Italy, Economic Research and International Relations Area.
    7. Fabio Busetti & Claire Giordano & Giordano Zevi, 2016. "The Drivers of Italy’s Investment Slump During the Double Recession," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 2(2), pages 143-165, July.
    8. Claire Giordano & Marco Marinucci & Andrea Silvestrini, 2016. "Investment and investment financing in Italy: some evidence at the macro level," Questioni di Economia e Finanza (Occasional Papers) 307, Bank of Italy, Economic Research and International Relations Area.
    9. Guido Bulligan & Fabio Busetti & Michele Caivano & Pietro Cova & Davide Fantino & Alberto Locarno & Lisa Rodano, 2017. "The Bank of Italy econometric model: an update of the main equations and model elasticities," Temi di discussione (Economic working papers) 1130, Bank of Italy, Economic Research and International Relations Area.
    10. Davide Dottori & Giacinto Micucci, 2018. "Corporate liquidity in Italy and its increase in the long recession," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(3), pages 981-1014, December.
    11. Bańbura, Marta & Albani, Maria & Ambrocio, Gene & Bursian, Dirk & Buss, Ginters & de Winter, Jasper & Gavura, Miroslav & Giordano, Claire & Júlio, Paulo & Le Roux, Julien & Lozej, Matija & Malthe-Thag, 2018. "Business investment in EU countries," Occasional Paper Series 215, European Central Bank.

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    More about this item

    Keywords

    non-construction investment; uncertainty; credit constraints;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications

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