Weakness in Investment Growth: Causes, Implications and Policy Responses

Ayhan Kose, Franziska Ohnsorge, Ye, Lei (Sandy) and Ergys Islamaj

No 11886, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Investment growth in emerging market and developing economies has slowed sharply since 2010. This paper presents a comprehensive analysis of the causes and implications of this slowdown and presents a menu of policy responses to improve investment growth. It reports four main results. First, the slowdown has been broad†based and most pronounced in the largest emerging markets and in commodity exporters. Second, it reflects a range of obstacles: weak activity, negative terms†of†trade shocks, declining foreign direct investment inflows, elevated private debt burdens, heightened political risk, and adverse spillovers from major economies. Third, by slowing capital accumulation and technological progress embedded in investment, weak post†crisis investment growth has contributed to sluggish growth of potential output in recent years. Finally, although specific policy priorities depend on country circumstances, policymakers can boost investment both directly, through public investment, and indirectly, by encouraging private investment, including foreign direct investment, and by undertaking measures to improve overall growth prospects and the business climate.

Keywords: Emerging markets; Investment slowdown; Policy space; Infrastructure investment; Policies (search for similar items in EconPapers)
JEL-codes: E22 F2 F6 O1 O4 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://cepr.org/publications/DP11886 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Weakness in investment growth: Causes, implications and policy responses (2017)
Working Paper: Weakness in Investment Growth: Causes, Implications and Policy Responses (2017)
Working Paper: Weakness in investment growth: causes, implications and policy responses (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:11886

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP11886

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().