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(Why) Is investment weak?

Author

Listed:
  • Ryan Niladri Banerjee
  • Jonathan Kearns
  • Marco Jacopo Lombardi

Abstract

In spite of very easy financing conditions globally, investment has been rather weak in the aftermath of the Great Recession. What explains this apparent disconnect? The evidence suggests that, historically, uncertainty about the future state of the economy and expected profits play a key role in driving investment, and financing conditions less so. As a result, investment after the Great Recession appears to have been broadly in line with what could have been expected based on past relationships. A stronger recovery of investment would seem to depend on a reduction in economic uncertainty and expectations of stronger future growth.

Suggested Citation

  • Ryan Niladri Banerjee & Jonathan Kearns & Marco Jacopo Lombardi, 2015. "(Why) Is investment weak?," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:1503g
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    References listed on IDEAS

    as
    1. Luigi Guiso & Giuseppe Parigi, 1999. "Investment and Demand Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 185-227.
    2. Nick Bloom & Stephen Bond & John Van Reenen, 2007. "Uncertainty and Investment Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 74(2), pages 391-415.
    3. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    4. Ellis Connolly & Jarkko Jääskelä & Michelle van der Merwe, 2013. "The Performance of Resource-exporting Economies," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 19-30, September.
    5. Anamaria Illes & Marco Jacopo Lombardi, 2013. "Interest rate pass-through since the financial crisis," BIS Quarterly Review, Bank for International Settlements, September.
    Full references (including those not matched with items on IDEAS)

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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
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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