Determinants of U.S. Business Investment
IMF Working Papers, June 15, 2018
Source details
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- Determinants of U.S. Business Investment
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Bibliographic details
- Authors: Emanuel Kopp
- Published: June 15, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484361504.001
Overview
- U.S. business investment declined sharply during the global financial crisis and did not pick up as expected in the recovery phase.
- The investment slowdown occurred despite:
- record corporate profits and retained earnings,
- highly supportive financial conditions,
- improved sentiment,
- rising equity valuations,
- strong labor markets.
- The paper applies accelerator models and Bayesian Model Averaging to assess whether U.S. business investment has been unusual.
Methodology
- Models applied:
- accelerator models,
- Bayesian Model Averaging.
Key findings
- Cautious expectations of future aggregate demand growth explain most of the weakness in investment.
- The oil and gas sector accounts for a considerable portion of the investment slump.
- Once these factors are taken into account, the behavior of U.S. business investment in recent years has not been unusual.
- There is very little evidence that:
- uncertainty held back investment, or
- firms’ financial measures "crowded out" capital expenditure.
Subjects and keywords
- Subject: Bank credit, Financial crises, Financial institutions, Global financial crisis of 2008-2009, Money, National accounts, Oil prices, Prices, Private investment, Stocks
- Keywords: accelerator model, accelerator models, Bank credit, Bayesian Model Averaging, business investment, consumption deflator, equipment investment, firm, Global, Global financial crisis of 2008-2009, growth outcome, investment activity, investment gap, investment growth, Oil prices, private fixed investment, Private investment, Stocks, WP
Content in this bundle
- Determinants of U.S. Business Investment, WP/18/139, June 2018