<p>Cited from Wikipedia, we know:</p>

<p><strong>Gross private domestic investment</strong> is the measure of physical investment used in computing GDP in the measurement of nations' economic activity. This is an important component of GDP because it provides an indicator of the future productive capacity of the economy. It includes replacement purchases plus net additions to capital assets plus investments in inventories.</p>

<p><strong>Gross fixed capital formation (GFCF)</strong> is a macroeconomic concept used in official national accounts. GFCF is a component of the expenditure on gross domestic product (GDP), and thus shows something about how much of the new value added in the economy is invested rather than consumed. GFCF is not a measure of total investment, because only the value of net additions to fixed assets is measured, and all kinds of financial assets are excluded, as well as stocks of inventories and other operating costs (the latter included in intermediate consumption).</p>

<p>If I wanna study the relationship between <strong>Effective federal funds rate</strong> and <strong>investment</strong>, in particular, whether there is a linear relationship between the annual percent change of these two quantities, which one should I choose to estimate the <strong><em>investment</em></strong>? Thanks.</p>

<p>Data source: <a href="https://fred.stlouisfed.org/series/USAGFCFQDSMEI" rel="nofollow noreferrer">https://fred.stlouisfed.org/series/USAGFCFQDSMEI</a></p>

<p><a href="https://fred.stlouisfed.org/series/GPDI" rel="nofollow noreferrer">https://fred.stlouisfed.org/series/GPDI</a></p>

<gdp><interest-rate>
What's the difference between gross fixed capital formation and gross private domestic investment?
Jiahui Zhang
# What's the difference between gross fixed capital formation and gross private domestic investment?

(Asked by: username_0 on 2016-12-11)

Cited from Wikipedia, we know:

**Gross private domestic investment** is the measure of physical investment used in computing GDP in the measurement of nations' economic activity. This is an important component of GDP because it provides an indicator of the future productive capacity of the economy. It includes replacement purchases plus net additions to capital assets plus investments in inventories.

**Gross fixed capital formation (GFCF)** is a macroeconomic concept used in official national accounts. GFCF is a component of the expenditure on gross domestic product (GDP), and thus shows something about how much of the new value added in the economy is invested rather than consumed. GFCF is not a measure of total investment, because only the value of net additions to fixed assets is measured, and all kinds of financial assets are excluded, as well as stocks of inventories and other operating costs (the latter included in intermediate consumption).

If I wanna study the relationship between **Effective federal funds rate** and **investment**, in particular, whether there is a linear relationship between the annual percent change of these two quantities, which one should I choose to estimate the ***investment***? Thanks.

Data source: <https://fred.stlouisfed.org/series/USAGFCFQDSMEI>

<https://fred.stlouisfed.org/series/GPDI>

**Tags:** gdp, interest-rate

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## 0 answers

