Working Paper: NBER ID: w18990
Authors: Rüdiger Bachmann; Peter Zorn
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.
Keywords: No keywords provided
JEL Codes: E20; E22; E30; E32; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Aggregate demand shocks (E00) | Aggregate investment growth (E22) |
| Technological factors (O30) | Aggregate investment growth (E22) |
| Sales as an investment determinant (G31) | Aggregate investment fluctuations (E22) |