Weakness in Investment Growth : Causes, Implications and Policy Responses
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...
| Main Authors: | , , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/267921488463293454/Weakness-in-investment-growth-causes-implications-and-policy-responses http://hdl.handle.net/10986/26240 |
| Summary: | 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. |
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