Investing in sustainable recovery

The chapter analyses global investment trends before and after the economic crisis of 2008 - 2010 and investigates the relationship between employment and real investment. A focus is laid upon the impact of uncertainty on investment activity and employment outcomes. The chapter finds that investors’ perception of uncertainty has been increasing over the last decades and so has the volatility of real investment for many advanced countries. Using a vector autoregression, the impact of increasing uncertainty on investment and employment is quantified and shows that significant gains in terms of investment and employment could be achieved if economic uncertainty could be reduced. In response to the uncertain environment many firms have been significantly increasing their cash holdings and continue to hold back large investments.