What Drives Aggregate Investment? Evidence from German Survey Data

Bachmann, Ruediger; Zorn, Peter

doi:10.3386/w18990

Cited by 4 publications

(4 citation statements)

References 20 publications

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“…This suggests that when firms think about their future business activity, demand conditions seem to play a more important role than supply conditions. This result is consistent with Bachmann and Zorn (2016), who show that a large part of fluctuations in aggregate investment can be attributed to demand shocks.…”

Section: Supply Vs Demand Shockssupporting

confidence: 81%

Can Firms See into the Future? Survey Evidence from Germany

Massenot

Pettinicchi

2017

SSRN Journal

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Section: Supply Vs Demand Shockssupporting

confidence: 81%

Can Firms See into the Future? Survey Evidence from Germany

Massenot

Pettinicchi

2017

SSRN Journal

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“…The emphasis on the demand origins of business cycles complements results by Angeletos et al (2018), who find that most business cycle fluctuations do not seem to be driven by supply shocks such as technological innovations. Bachmann and Zorn (2013) find that demand shocks are the dominant driver of output growth fluctuations in German data. Those findings are in contrast to the results of prominent studies based on tightly specified DSGE models, which tend to emphasize supply factors.…”

Section: Introductionmentioning

confidence: 78%

What Do Sectoral Dynamics Tell Us About the Origins of Business Cycles?

Matthes¹,

Schwartzman²

2019

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We use economic theory to rank the impact of structural shocks across sectors. This ranking helps us to identify the origins of U.S. business cycles. To do this, we introduce a Hierarchical Vector Auto-Regressive model, encompassing aggregate and sectoral variables. We find that shocks whose impact originate in the "demand" side (monetary, household and government consumption) account for 43 percent more of the variance of U.S. GDP growth at business cycle frequencies than identified shocks originating in the "supply" side (technology and energy). Furthermore, corporate financial shocks, which theory suggests propagate to large extent through demand channels, account for an amount of the variance equal to an additional 82 percent of the fraction explained by these supply shocks.

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“…One important part of corporate expectations are firms' expectations of the growth rate of the (real) gross domestic product (GDP). Since aggregate demand is a key variable for fluctuations in corporate investment demand (Bachmann and Zorn, 2018) and GDP is the broadest measure of aggregate demand available, firms' expectations of GDP growth are an important driver of their business decisions (Tanaka et al, 2019). 1 In a recent survey, a majority of German firms report that a solid understanding of the future business cycle situation is the most important factor for them when estimating future demand for their products.…”

Section: Introductionmentioning

confidence: 99%