Comment of the Day: Robert Waldmann: Some Questions About Low Investment, to Some of Which I Have Half-Adequate Answers...: "Ah, yes! Basically just the very primitive accelerator without even a real interest term...
...and no hint of looking forward. Who would ever have thought that? http://tinyurl.com/dl20161118a I would say that it might be hard to see the effect of looking forward on investment if managers are totally clueless. Estimated effects require, if not rational expectations, at least a marked positive correlation of subjective and objective expected changes.
Another question. Is capital so very expensive for risky businesses? It depends on how risky (and how big). Yields on non junk corporate bonds are low. Dividend yields are low. I don't see much basis for your claim that the cost of capital is high.
I don't think that a lack of faith in banks ability to make AAA instruments out of risky assets can explain why investment is low compared to 65-87. The financial alchemy is new. In our childhood and youth there was no such alchemy in which to have or have not faith. I'd say there may have been a financial magic bubble late 90s through 2008 but not a secular decline in faith in financial magic.
On housing, you don't mention expected relative appreciation of house prices vs the CPI. This is important and has changed a lot. I think it is the key variable. It surely is worth a mention.
On non-residential, I see something to do with a dot-com bubble and something to do with high inflation. I have no explanation of the clear crude raw positive correlation of non residential investment share and inflation.
The rest seems to me to be accelerator plus asset price bubbles. Doesn't fit standard intertemporal models, because bubbles depend on wildly irrational expectations.
