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Increases in Business Investment Rates in OECD Countries in the 1990s: How Much Can be Explained by Fundamentals?


  • Florian Pelgrin
  • Sebastian Schich
  • Alain de Serres


In several OECD countries, investment rates in the business sector grew strongly in the second half of the 1990s. In some cases, the strength of private investment relative to output growth had raised concerns about the risk of capital overhang and the prospect of a prolonged period of slow capital formation in order to bring investment levels back to more sustainable levels. It is possible that the stock market boom has contributed to a rise of investment demand to an excessive level, not only in the United States, but also in the United Kingdom, Canada, Scandinavia and Greece. The purpose of this paper is to assess the contribution of fundamental determinants to the change in investment in the second half of the 1990s, based on the estimation of panel cointegration equations for gross business investment for 18 OECD countries from 1970 to 1999. In addition to the levels of real GDP and a measure of the cost of capital, the set of explanatory variables includes four alternative ... Dans quelle mesure la hausse des taux d'investissement dans les pays de l'OCDE durant les années 90 peut-elle être expliquée par les fondamentaux? Dans plusieurs pays de l’OCDE, les taux d’investissement du secteur des entreprises ont connu une forte croissance durant la deuxième moitié des années 90. Dans certains cas, la croissance rapide de l’investissement privé comparativement à celle de la production globale avait soulevé certaines inquiétudes concernant le risque d’une sur-accumulation de capital et la perspective d’une période prolongée de faible formation de capital nécessaire pour ramener le taux d’investissement à un niveau plus soutenable. Il est possible que la bulle sur les marchés boursiers ait entraîné un sur-investissement non-seulement aux États-Unis mais aussi au Royaume-Uni, au Canada, en Scandinavie et en Grèce. L’objectif de cette étude est d’évaluer la contribution des déterminants fondamentaux au changement dans l’investissement durant la deuxième moitié des années 90, à partir de l’estimation d’équations de panel pour l’investissement brut du secteur des entreprises dans 18 pays de l’OCDE sur la ...

Suggested Citation

  • Florian Pelgrin & Sebastian Schich & Alain de Serres, 2002. "Increases in Business Investment Rates in OECD Countries in the 1990s: How Much Can be Explained by Fundamentals?," OECD Economics Department Working Papers 327, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:327-en

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    Cited by:

    1. Landon, Stuart & Smith, Constance E., 2009. "Investment and the exchange rate: Short run and long run aggregate and sector-level estimates," Journal of International Money and Finance, Elsevier, vol. 28(5), pages 813-835, September.
    2. Philippe Aghion & Thibault Fally & Stefano Scarpetta, 2007. "Credit constraints as a barrier to the entry and post-entry growth of firms," Economic Policy, CEPR;CES;MSH, vol. 22, pages 731-779, October.
    3. Ricardo Adrogué & Martin Cerisola & Gaston Gelos, 2010. "Brazil's long-term growth performance: trying to explain the puzzle," Journal of Economic Studies, Emerald Group Publishing, vol. 37(4), pages 356-376, September.
    4. Ciżkowicz, Piotr & Rzońca, Andrzej, 2010. "Inflation and corporate investment in selected OECD countries in the years 1960-2005 – an empirical analysis," MPRA Paper 29846, University Library of Munich, Germany.

    More about this item


    développement financier; financial development; investissement; investment; non-stationary panels; panel non-stationnaire;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


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