Économie et Statistique n° 341-342 - 2001Investment and Financing of Firms
Can 1990s Investment be explained by its Traditional Determinants?
In recent years, periods of growth and recession have generally been accompanied by a related investment trend. However, the 1995 upturn did not prompt an increase in investment in line with what might have been expected from the link usually observed between investment and value-added. The following two years also saw growth contradictions between these two macroeconomic indicators. The usual theoretical models, particularly the accelerator principle, cannot explain the separation between expected investment and actual investment during this period. The explanatory power of the usually used models is enhanced by considering investment determinants other than anticipated market growth, such as corporate profitability and investment financing costs and conditions. A comparison of 1980-2000 investment including these new variables along with investment actually observed in the national accounts finds that the model reproduces the reality satisfactorily overall. In particular, it was not until corporate profitability returned starting in 1997 that the effects of the investment slump seen in previous years fell off. The recovery in business profits also appears to have furthered capital accumulation in the leading developed countries.