## Determinants of U.S. Business Investment

_IMF Working Papers, June 15, 2018_

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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

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### 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

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## Content in this bundle

- **Determinants of U.S. Business Investment, WP/18/139, June 2018**
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_Source: https://www.imf.org/en/publications/wp/issues/2018/06/15/determinants-of-u-s-45985_