Investments and economic cycles. Literature review

Project “The Changing Role of Companies’ Intangibles over the Crisis”

Naidenova Iuliia25.03.2013

Like a circle in a spiral, like a wheel within a wheel, Never ending or beginning, on an ever spinning wheel.As the images unwind, like the circles that you find,In the windmills of your mind.

A. Bergman, M.Bergman, M.Legrand, The Windmills of Your Mind

3

Search keywords

Business cyclesCrisis

RecessionEconomic fluctuations

InvestmentsR&D expenditures

Capital expendituresIntellectual capital

+ Intangibles

4

Business cycles theory

•Kondratieff cycle (50 years)

•Juglar cycle (7-11 years)

•Kitchin cycle (3-5 years)

Bysiness cycles periodicity (Guevara,

2011):

•Keynesian•Real business

cycle (RBC) theory

•Austrian business cycle (ABC) theory

•Minsky’s financial instability hypothesis (FIH)

Theories of the business cycle

(Mulligan, 2013):

5

Empirical research. Channels of crisis influence on investments

Cutting of investments

(Peltonen et al, 2012; )

Higher uncertainty (Chen, Funke, 2010);

Lower credit availability (Halegatte et al, 2008;

Gaiotti, 2013; Peltonen et al, 2012; Aghion et al,

2012);

Faster decision making (Guevara, 2011).

6

Empirical research. ICOwnership structure and corporate governance could play role during the crisis (Lemmon, Lins, 2003);

Intangibles could enhance recovery (Guevara, 2011; Grupp, 2007; Sadi, 2000; Edquist, 2011);

RC and R&D are relevant during an economic crisis (Guevara, 2011; Nuno, 2011);

R&D could be both procyclical and countercyclical (Barlevy, 2007; Nuno, 2011; Aghion et al, 2012; Shinagawa, 2013).

7

Investment drivers

Financial conditions (Agliari et al, 2006; Love, Zicchino, 2006);

Liquidity and earnings retentions (Love, Zicchino, 2006; Eklund, 2010);

Investment opportunities (Eklund, 2010);

Uncertainty (Bloom et al, 2007; Demir, 2009), Political Uncertainty (Julio, Yook, 2012)

Public expenditure on infrastructure (Aiello et al, 2012)