NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

What Drives Aggregate Investment? Evidence from German Survey Data

Rüdiger Bachmann, Peter Zorn

NBER Working Paper No. 18990
Issued in April 2013, Revised in February 2018
NBER Program(s):Economic Fluctuations and Growth, Monetary Economics

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.

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Document Object Identifier (DOI): 10.3386/w18990

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