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Explaining the Low Level of Investment in Slovenia

Author

Listed:
  • Jože Damijan
  • Jozef Konings
  • Črt Kostevc
  • Katja Zajc Kejžar
Abstract
This report analyses business investment in Slovenia and offers an explanation of why investment was hit more and longer after the global financial crisis relative to other European countries. Using macroeconomic data for all EU countries, Norway and Switzerland we find that Slovenian corporate investment was less responsive to the business cycle after the global financial crisis. In addition, the high deleveraging process in the Slovenian private sector has contributed to the lower investment in Slovenia compared to other European countries. This pattern is confirmed using a sector level approach. Furthermore, using confidential firm level data we find evidence of the granular nature of investment, where the largest Slovenian firms dominate the aggregate investment pattern. These are also the firms with a large debt overhang, which invest less, explaining the aggregate picture.

Suggested Citation

  • Jože Damijan & Jozef Konings & Črt Kostevc & Katja Zajc Kejžar, 2022. "Explaining the Low Level of Investment in Slovenia," European Economy - Discussion Papers 169, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:dispap:169
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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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