Is investment driven more by supply or demand?

We look at the situations of the euro zone and France. The question of what drives investment is especially important , as , after the COVID crisis: Some are suggesting that policy should focus on b oosting consumption, with the argument that stimulating demand will kick-start corporate investment; Others argue instead that supply should be s timulat ed with business-friendly policies (tax cuts, subsidies for job creation, conversion of debt into equity, etc.). To determine whether the current situation calls for demand-side or supply-side policies, we seek to ascertain whether corporate investment depends primarily on: Either growth; Or earnings, debt and market valuation (Tobin’s q). We find that investment is determined by supply (Tobin’s q, debt) and not by demand, which suggests that recovery plans in the euro zone and France should focus on supporting companies.