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.

English, French

Business Investment in the OECD Economies

Recent Performance and some Implications for Policy

Investment growth in the OECD area has been higher in the second half of the 1980s than in the 1970s. However, the ratio of net investment to GDP has remained low by past cyclical standards. This paper first reviews the evolution of business-sector fixed investment and addresses measurement issues related to computers and intangible investment. It then examines the determinants of investment and the extent to which governments can and should influence capital formation. Time-series properties of investment, output and the cost of capital do not appear to be consistent with well-established theories of investment. The best predictor of investment is found to be its own past history. Therefore, although higher investment could be beneficial to future consumption and economic growth, the effectiveness of policies to raise investment via the cost of capital is largely uncertain ...


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