Low rates can harm productivity, say Liu, Mian and Sufi
Low rates may end up discouraging investment across the economy, authors say
New research suggests low interest rates may encourage market concentration and thereby harm productivity, setting out a possible explanation for advanced economies’ lacklustre performance in recent years.
The paper, by Ernest Liu, Atif Mian and Amir Sufi, outlines a model in which market structure and strategic competition matter for economy-wide outcomes. Though lower rates will tend to encourage investment, there may nevertheless be a “discouragement effect” that stops some firms from
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