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What drives aggregate investment? Evidence from German survey data

Author

Listed:
  • Bachmann, Rüdiger
  • Zorn, Peter

Abstract

The ifo Investment Survey asks firms in the German manufacturing sector about the importance of sales, technological factors, finance, return expectations, and macroeconomic policy for their investment activity in a given year. We show that these subjective investment determinants 1) capture economically what their labels suggest, and 2) have strong explanatory power for aggregate manufacturing investment growth fluctuations. In a second step, we use these determinants to identify aggregate demand and aggregate technology shocks and argue that the bulk of the variance of both aggregate manufacturing investment and output growth fluctuations (as much as approximately two thirds in both cases) is explained by aggregate demand shocks. Consistent with neoclassical views, however, technological factors are the most important investment determinant on average.

Suggested Citation

  • Bachmann, Rüdiger & Zorn, Peter, 2020. "What drives aggregate investment? Evidence from German survey data," Munich Reprints in Economics 84785, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenar:84785
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    Cited by:

    1. Alexandros Botsis & Christoph Gortz & Plutarchos Sakellaris, 2024. "Quantifying Qualitative Survey Data with Panel Data Structure," CAMA Working Papers 2024-21, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    2. Sebastian Blesse & Florian Buhlmann & Philipp Heil & Davud Rostam-Afschar, 2025. "Local Policy Misperceptions and Investment: Experimental Evidence from Firm Decision Makers," CESifo Working Paper Series 11855, CESifo.
    3. Cevat Giray Aksoy & Mathias Dolls & Justyna Klejdysz & Andreas Peichl & Lisa Windsteiger, 2025. "Speaking of Debt: Framing, Guilt, and Economic Choices," CESifo Working Paper Series 12060, CESifo.
    4. Link, Sebastian & Peichl, Andreas & Roth, Christopher & Wohlfart, Johannes, 2023. "Information frictions among firms and households," Journal of Monetary Economics, Elsevier, vol. 135(C), pages 99-115.
    5. Dovern, Jonas & Müller, Lena Sophia & Wohlrabe, Klaus, 2023. "Local information and firm expectations about aggregates," Journal of Monetary Economics, Elsevier, vol. 138(C), pages 1-13.
    6. George-Marios Angeletos, 2018. "Frictional Coordination," Journal of the European Economic Association, European Economic Association, vol. 16(3), pages 563-603.
    7. Frache, Serafin & Lluberas, Rodrigo & Turen, Javier, 2024. "Belief-dependent pricing decisions," Economic Modelling, Elsevier, vol. 132(C).
    8. Massenot, Baptiste & Pettinicchi, Yuri, 2018. "Can firms see into the future? Survey evidence from Germany," Journal of Economic Behavior & Organization, Elsevier, vol. 145(C), pages 66-79.
    9. Christian Matthes & Felipe Schwartzman, 2019. "What Do Sectoral Dynamics Tell Us About the Origins of Business Cycles?," Working Paper 19-9, Federal Reserve Bank of Richmond.
    10. Zeno Enders & Franziska Hünnekes & Gernot Müller, 2022. "Firm Expectations and Economic Activity," Journal of the European Economic Association, European Economic Association, vol. 20(6), pages 2396-2439.
    11. Botsis, Alexandros & Görtz, Christoph & Sakellaris, Plutarchos, 2024. "Quantifying qualitative survey data with panel data," Journal of Economic Dynamics and Control, Elsevier, vol. 167(C).
    12. Alessandro Mistretta, 2025. "Synchronization vs. Transmission: The Effect of the German Slowdown on the Italian Business Cycle," International Journal of Central Banking, International Journal of Central Banking, vol. 21(1), pages 331-386, January.
    13. Xiaowen Wang, 2025. "Inattentive Capital Investment with Nonconvex Costs," Annals of Economics and Finance, Society for AEF, vol. 26(1), pages 389-413, May.
    14. Alexandros Botsis & Christoph Görtz & Plutarchos Sakellaris, 2020. "Quantifying Qualitative Survey Data: New Insights on the (Ir)Rationality of Firms' Forecasts," CESifo Working Paper Series 8148, CESifo.
    15. Dovern, Jonas & Müller, Lena Sophia & Wohlrabe, Klaus, 2020. "How Do Firms Form Expectations of Aggregate Growth? New Evidence from a Large-scale Business Survey," Working Papers 15, German Research Foundation's Priority Programme 1859 "Experience and Expectation. Historical Foundations of Economic Behaviour", Humboldt University Berlin.
    16. 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.
    17. Marek Ignaszak & Petr Sedlácek, 2021. "Profitability, Productivity and Growth," Economics Series Working Papers 937, University of Oxford, Department of Economics.
    18. Sebastian Link & Manuel Menkhoff & Andreas Peichl & Paul Schüle, 2024. "Downward Revision of Investment Decisions after Corporate Tax Hikes," American Economic Journal: Economic Policy, American Economic Association, vol. 16(4), pages 194-222, November.
    19. Michał Gradzewicz, 2022. "How do firms respond to demand and supply shocks?," NBP Working Papers 344, Narodowy Bank Polski.

    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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