Financial crisis could cut long-term productivity by hitting spending on R&D
BoE working paper posits one reason behind the drop in productivity
A new Bank of England working paper uses a simple endogenous growth model to show how a financial crisis might have a permanent effect on the level of total factor productivity (TFP) – finding that a rise in the spread between the interest paid by firms and the risk-free rate can hit spending on research and development (R&D), which in turn "leads to permanent falls in the levels of output and labour productivity".
In The effect of the financial crisis on TFP growth: a general equilibrium
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