Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/110352 
Authors: 
Year of Publication: 
2015
Series/Report no.: 
Kiel Working Paper No. 1996
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
I empirically analyze the dynamics of business investment following normal recessions (declines in business investment that are not associated with banking crises) and banking crises. Using a panel of 16 advanced economies, I find evidence for significant non-linear trend reversion or bounce-back effects on the level of business investment following normal recessions, i.e., the deeper the previous recession was, the higher the growth rate of business investment will be. The trend reversion effect is absent when a decline in business investment is associated with a banking crisis. As a consequence, normal recessions do not have significant permanent effects on the level of business investment, whereas banking crises have large and significant permanent effects. The results are in line with important theories and other empirical results on business cycle dynamics.
Subjects: 
business investment
business cycle
recovery
banking crises
asymmetries
JEL: 
E32
C33
Document Type: 
Working Paper

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