Investment and Economic Growth

Abstract

The variable gross investment or gross fixed capital formation is composed of two elements: the investment for replacement of the fixed capital consumed and new physical capital investment or net fixed capital formation. The latter is supposed to be the investment that allows the growth of productive capacity and, therefore, of economic growth in the medium and long term. In this paper, we perform a statistical and econometric study of the variables mentioned to know their trends and determine if there is indeed a causal relationship between the net fixed capital formation and economic growth, the former being the independent variable. We conducted our analysis on three countries: the USA, the Republic of Korea, and Brazil.