Investment gaps after the crisis


OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.


Investment Gaps after the Crisis

The downturn in fixed investment among advanced economies from the onset of the global crisis was unusually severe, widespread and long-lasting relative to comparable episodes in the past. As a result, investment gaps are large in many countries, not only in relation to past norms but also relative to projected future steady-state levels, with a gap of 2 percentage points of GDP or more in several countries. A significant proportion of this investment shortfall is attributable to soft demand conditions (the accelerator effect) but financial factors and heightened uncertainty have also played a role. In addition to continued support to demand from macroeconomic policies, the recovery in investment could be boosted by tackling longer-term policy issues that bear on investment decisions indirectly, by reducing financial fragmentation in the euro area and by undertaking growth-friendly structural reforms.


English

Keywords: investment, uncertainty, economic outlook, balance sheet, cost of capital

JEL:
D24: Microeconomics / Production and Organizations / Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity;
E22: Macroeconomics and Monetary Economics / Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy / Investment; Capital; Intangible Capital; Capacity;
O16: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance;
G31: Financial Economics / Corporate Finance and Governance / Capital Budgeting; Fixed Investment and Inventory Studies; Capacity