Investment, current account and the long swings of employment

Arbeitspapier

We estimate the relationship between investment and unemployment over the time period 1960-2015 in 20 OECD countries. While neoclassical growth theory typically assumes full employment – with no effect of investment on unemployment – we find that over our sample period covering more than five decades, a statistically significant negative relationship does exist: when investment fell, unemployment increased. When the time period is broken down into two sub-periods to take account of the Great Recession, we find that the estimated coefficient of investment is slightly smaller when the period 2001-2015 is added to the 1960-2000 period. We also find a positive effect of the current account surplus on unemployment that very likely works through investment. A non-monetary model shows how an increase in policy uncertainty that sharply contracts investment and raises unemployment can lead to an increase in current account surplus.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper Series ; No. W18:05

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: General ; Investment; Capital; Intangible Capital; Capacity ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: Long swings of unemployment ; investment ; current account ; Great Recession ; Investition ; Leistungsbilanz ; Arbeitslosigkeit ; Weltwirtschaftskrise ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hoon, Hian Teck ; Katsime, Margarita ; Gylfi Zoega
• Event: Veröffentlichung
• (who): University of Iceland, Institute of Economic Studies (IoES)
• (where): Reykjavik
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/273299
• Last update: 10.03.2025, 11:45 AM CET