Structures Investment and Economic Growth: A Long-term International Comparison

Abstract

Interest has grown again in recent years about the long-term and cyclical nature of building investment and its effect on the macroeconomy. This paper investigates the nature of building trends and cycles from the 19th century to the present day for eight major OECD economies. Focusing predominantly on non-housing structures, the Kalman filter is used to decompose the series into trends and cycles. It was found that building cycles exist in all countries, though with considerable variation. Comparisons of volatility between countries and between the different types of fixed investment are made. The long-run share of fixed investment in structures as a proportion of national income is investigated. Consideration is given to whether international building investment trends are coincident, and an analysis made of the long-term correlation between structures investment cycles.