Within-sector performance drives euro area investment divergence
Persistent divergence in euro area investment growth across 1996–2025 stems from country-specific performance rather than structural asset allocation, according to a Banca d'Italia study. While downturns contract simultaneously by 10 to 15 percent, recoveries diverge substantially.
Within-sector gaps outweigh asset mix
A shift-share decomposition of national accounts data shows that the sector-asset composition effect plays a negligible role in aggregate growth differentials between Germany, France, Italy, and Spain.
Instead, persistent divergence reflects performance gaps within comparable categories.
Econometric estimates from an augmented accelerator model show real GDP growth is the dominant cyclical driver across all major economies.
Financial conditions and user capital costs exert a strong secondary impact, particularly for residential and non-residential construction during credit stress episodes.
By contrast, intellectual property products display a steady structural upward trend across all countries that remains largely decoupled from the business cycle.
Asymmetric paths from Berlin to Rome
Cross-country trajectories diverged after major shocks.
Following the 2008 financial crisis, Spain faced protracted contraction from a property collapse, while Italy took over a decade to regain lost ground.
After 2019, Italian investment rebounded above its pre-crisis level, bolstered by the Superbonus scheme and the National Recovery and Resilience Plan.
In contrast, German investment weakened after 2020 due to supply-side constraints, energy price shocks, and automotive headwinds.
Standard models miss structural shifts
The findings expose how standard accelerator models miss vital supply-side frictions and policy interventions.
Blaming divergent capital growth on sector specialization is no longer viable.
National policymakers must fix domestic structural hurdles instead of hoping common monetary policy will cure localized investment stagnation.