Steve Bannister (where have you gone Joe Di Maggio?) pointed out this nice post by Menzie Chinn on the "puzzle" (sic) of the slow investment recovery during the crisis. Note that it is actually not a puzzle at all. Chinn cites a study by the Vampire-Squid (Goldman Sachs), that concludes that (wait for the surprise) "the accelerator model generally fits well." Chinn also finds that lending conditions and "slow GDP growth (attributable to fiscal drag) are important determinants of low nonresidential fixed investment." Is rain wet?
PS: Lending conditions (which is actually a measure of liquidity) might actually be caused by the level of activity and investment rather than the other way round.
PS: Lending conditions (which is actually a measure of liquidity) might actually be caused by the level of activity and investment rather than the other way round.
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