Equipment Expenditures Since 1995: The Boom and the Bust

6 Pages Posted: 26 Apr 2005

See all articles by Jonathan McCarthy

Jonathan McCarthy

Federal Reserve Bank of New York - Research Department

Date Written: October 2001

Abstract

Business investment in equipment surged in the 1990s, then fell back sharply after mid-2000. A popular explanation of these trends holds that the soaring stock market and declining computer prices of the last decade encouraged excess investment, setting the stage for the retrenchment that followed. Yet an analysis of the factors underlying investment suggests that capital spending patterns in the late 1990s would have been quite similar had stock values and equipment prices remained near their recent historical averages.

Keywords: investment, capital spending, forecasts

JEL Classification: E22, E27

Suggested Citation

McCarthy, Jonathan, Equipment Expenditures Since 1995: The Boom and the Bust (October 2001). Available at SSRN: https://ssrn.com/abstract=711369 or http://dx.doi.org/10.2139/ssrn.711369

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