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The Price of Capital Goods: A Driver of Investment Under Threat.

Authors :
Lian, Weicheng
Novta, Natalija
Pugacheva, Evgenia
Timmer, Yannick
Topalova, Petia
Source :
IMF Economic Review; Sep2020, Vol. 68 Issue 3, p509-549, 41p, 15 Charts, 10 Graphs
Publication Year :
2020

Abstract

Over the past three decades, the price of machinery and equipment fell dramatically relative to other prices in advanced and emerging market and developing economies. Using cross-country and sectoral data, we show that the decline in the relative price of tangible tradable capital goods provided a significant impetus to the capital deepening that took place during the same time period. The broad-based decline in the relative price of machinery and equipment, in turn, was driven by the faster productivity growth in the capital goods producing sectors relative to the rest of the economy, and deeper trade integration, which induced domestic producers to lower prices and increase their efficiency. Our findings suggest an additional channel through which rising trade tensions and sluggish productivity could threaten real investment growth going forward. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
20414161
Volume :
68
Issue :
3
Database :
Complementary Index
Journal :
IMF Economic Review
Publication Type :
Academic Journal
Accession number :
144951290
Full Text :
https://doi.org/10.1057/s41308-020-00118-0