Business investment after the crisis and the impact of monetary policy

Monetary policy can stimulate business investment in various ways, most directly by improving financing conditions. Despite the expansionary policy of the ECB, however, business investment in the euro area has not yet rebounded, following the strong declines it experienced during the Global Financial Crisis and the Sovereign Debt Crisis. We analyze the weakness in business investment in the euro area and the role of monetary policy along three aspects. First, we investigate which factors have been the most important impediments on business investment since the Global Financial Crisis. Second, we assess how business investment has developed compared to the historical experience with other financial crises. Third, we analyze how effective monetary policy is in stimulating business investment today.

Kiel Institute Expert