…firms in sectors that rely more on external funds, such as pharmaceuticals, have seen a larger fall in investment than other firms since the crisis. This finding is consistent with the view that a weak financial system and weak firm balance sheets have constrained investment.
That is Timothy Taylor, summarizing an IMF study, is an excellent post on the investment slowdown. Here is more from his summary:
- For these [advanced] economies, private investment has declined by an average of 25 percent since the crisis compared with precrisis forecasts, and there has been little recovery. In contrast, private investment in emerging market and developing economies has gradually slowed in recent years, following a boom in the early to mid-2000s.
- The investment slump in the advanced economies has been broad based. Though the contraction has been sharpest in the private residential (housing) sector, nonresidential (business) investment—which is a much larger share of total investment—accounts for the bulk (more than two-thirds) of the slump. …