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The Conditions for Sustainable U.S. Recovery: The Role of Investment

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  • Philip Arestis
  • Elias Karakitsos

Abstract

The anemic U.S. economic recovery and the threat of a double-dip recession stem from the weakness of investment, due to excess capacity created in the euphoric years of the "new economy" bubble. The current imbalances in the corporate sector (i.e., the all-time-high indebtedness in the face of falling asset prices) are preventing investment from picking up and are laying the foundations for a new, long-lasting expansion. Tax reductions may create a cyclical upturn in the short run, and may promote the anemic recovery, but such stimulus to demand is unsustainable in the long run. The root of the problem is the imbalance in the corporate sector, which will take time for correction.

Suggested Citation

  • Philip Arestis & Elias Karakitsos, 2003. "The Conditions for Sustainable U.S. Recovery: The Role of Investment," Economics Working Paper Archive wp_378, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_378
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    References listed on IDEAS

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    Cited by:

    1. Yilmaz Akyuz, 2006. "From Liberalization To Investment and Jobs: Lost in Translation," Working Papers 2006/3, Turkish Economic Association.
    2. Yilmaz Akyuz, 2008. "Managing Financial Instability in Emerging Markets: A Keynesian Perspective," Working Papers 2008/4, Turkish Economic Association.

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    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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