Wednesday, October 28, 2015

J. W. Mason — How Strong Is Business Investment, Really?

…the whole point of monetary policy is to stabilize output. For monetary policy to work, it needs to able to reliably offset lower than normal spending in other areas with stronger than normal investment spending. If after six years of extraordinarily stimulative monetary policy (and extraordinarily high corporate profits), business investment is just “where one would expect given that the overall recovery has been disappointing,” that’s a sign of failure, not of success.
Is the conclusion that monetary policy was wrong (should have been tighter), or that it was not up to the job. Those advocating for the primacy of fiscal policy would argue for the latter.

J. W. Mason's Blog
How Strong Is Business Investment, Really?
JW Mason | Assistant Professor of Economics, John Jay College, City University of New York

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