Investment as the Key to Recovery in the Euro Area?
CEPS Policy Briefs, No. 326
12 Pages Posted: 20 Nov 2014
Date Written: November 18, 2014
Abstract
Investment has declined in the euro area since the start of the economic and financial crisis, but this does not mean that there is necessarily an ‘investment gap’, explains Daniel Gros in this CEPS Policy Brief. Investment was probably above a sustainable level due to the credit boom before 2007. Moreover, the fall in the euro area’s potential growth − due to a combination of a sharp demographic slowdown and lower total factor productivity (TFP) growth − should also lead to a permanently lower investment rate. Increasing the investment rate might thus be the wrong target for economic policy.
Keywords: euro area, investment, euro, economic crisis, financial crisis
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