Post-crisis investment: back to normal? Pre, during and post-crisis - - PowerPoint PPT Presentation

CPB Netherlands Bureau for Economic Policy Analysis

Post-crisis investment: back to normal?

Pre, during and post-crisis developments in investments

Debby Lanser, Marco Ligthart Jason Rhuggenaath

CPB Netherlands Bureau for Economic Policy Analysis

Investment suffered a severe blow

Fig 2.1

CPB Netherlands Bureau for Economic Policy Analysis

Business and housing investment at its core

Fig 2.3

CPB Netherlands Bureau for Economic Policy Analysis

Decline mainly due to business and housing investment

Pre-crisis average (1995-2007) Crisis average (2008-2010) After crisis average (2011-2013) 2013 Post- and pre-crisis difference OECD18 total (b) 22.4 20.5 20.1 20.1

• 2.3

OECD18 housing 5.1 4.0 3.9 4.0

• 1.1

OECD18 public 3.6 3.7 3.4 3.2

• 0.4

OECD18 business 13.6 12.8 12.8 12.7

• 0.9
• Business and residential investment are mainly responsible for the decay
• Each accounts for 40 percent
• Public investment accounts for the remaining 20 percent.

CPB Netherlands Bureau for Economic Policy Analysis

Investment rate will return to its optimal value

Where will we be heading for after the crisis?

• The investment rate will recover to

its optimal value.

• The long-term investment rate

might be lower than its pre-crisis value due to the unsustainable nature of housing investment

• The optimal investment volume will

likely be lower, as output suffered a permanent loss

CPB Netherlands Bureau for Economic Policy Analysis

A sluggish recovery

Several factors will affect the speed of recovery:

• the legacy of the crisis still casts its shadow,

– large debt overhang – low inflation – low interest rates close to a zero lower bound

• the large role of residential investment
• credit supply restrictions
• higher perceived uncertainty (now almost obsolete)

CPB Netherlands Bureau for Economic Policy Analysis

R&D investments were relatively spared

CPB Netherlands Bureau for Economic Policy Analysis

R&D and expenditures on education were spared

• R&D investments and educational expenditures are key factors to

economic growth.

• R&D investments and educational expenditures have been relatively

spared by the crisis.

• The average OECD R&D investment rate rose from 2.2 percent in

2003 to 2.5 percent in 2013.

• The real expenditures on education, measured per student,

increased as well.

CPB Netherlands Bureau for Economic Policy Analysis

Conclusions

• Investment suffered a severe blow mainly due to business and

residential investment

• R&D investments and educational expenditures were spared
• The investment rate will likely recover, though sluggish, as

– Post crisis slump – Still apparent credit constraints (mainly for SMEs) – The large role of residential investment in the decay

• Downloadable:

http://www.cpb.nl/en/publication/investment-in-the-oecd-pre-and- post-crisis-developments