The New York Times


March 30, 2011, 7:14 pm

More on Unemployment and Investment

To follow up on John Taylor: suppose we look only at nonresidential investment, and suppose that we think (as we should) that the causation runs mainly from unemployment — a proxy for excess capacity — to business investment, rather than the other way around. Then the data since 1990 look like this:

DESCRIPTIONBEA, BLS

Investment is low as a share of GDP; well, that’s no surprise given how depressed the economy is. And if anything investment is a bit stronger than you might have expected from past behavior.


About Paul Krugman

Paul Krugman is an Op-Ed columnist for The New York Times.

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