What Drives Aggregate Investment? Evidence from German Survey Data
نویسندگان
چکیده
The Ifo Investment Survey (IS) asks firms in the German manufacturing sector about the importance of technical factors, sales, finance, profit expectations, and macroeconomic policy for their investment activity in a given year. Using the survey responses to these questions, we construct measures of aggregate technology and non-technology shocks to quantify their contributions to aggregate investment dynamics. We find that 1) consistent with neoclassical models, technical factors on average are the most important investment determinant; 2) prior to the Great Recession, at most one third of the variance of the aggregate investment growth rate can be explained by technical factors; we also find suggestive evidence that demand shocks interpreted as sentiment shocks explain the largest fraction of regular year-to-year investment growth fluctuations; 3) perhaps surprisingly, including data from the Great Recession, we find that a lack of the typically positive influence of technical factors makes them more important in explaining the (negative) aggregate investment growth rate during that time. JEL Classification: E20, E22, E30, E32.
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