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Capital Misallocation and Secular Stagnation

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Abstract

The widespread emergence of intangible technologies in recent decades may have significantly hurt output growth–even when these technologies replaced considerably less productive tangible technologies–because of low interest rates. After a shift toward intangible capital in production, the corporate sector becomes a net saver because intangible capital has a low collateral value. Firms’ ability to purchase intangible capital is impaired by low interest rates because low rates slow down the accumulation of savings and increase the price of capital, worsening capital misallocation. Our model simulations reproduce key trends in the U.S. in the period from 1980 to 2015.

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  • Andrea Caggese & Ander Pérez Orive, 2018. "Capital Misallocation and Secular Stagnation," Working Papers 1056, Barcelona School of Economics.
  • Handle: RePEc:bge:wpaper:1056
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    5. Giovanni Dell’Ariccia & Dalida Kadyrzhanova & Camelia Minoiu & Lev Ratnovski, 2021. "Bank Lending in the Knowledge Economy," The Review of Financial Studies, Society for Financial Studies, vol. 34(10), pages 5036-5076.
    6. Perotti, Enrico & Döttling, Robin, 2019. "Redistributive Growth," CEPR Discussion Papers 13984, C.E.P.R. Discussion Papers.
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    10. Shengxing Zhang & Nobuhiro Kiyotaki, 2017. "Intangibles, Inequality and Stagnation," 2017 Meeting Papers 1414, Society for Economic Dynamics.
    11. Bacchetta, Philippe & Benhima, Kenza & Kalantzis, Yannick, 2020. "Money and capital in a persistent liquidity trap," Journal of Monetary Economics, Elsevier, vol. 116(C), pages 70-87.
    12. Amir Kermani & Yueran Ma, 2020. "Asset Specificity of Non-Financial Firms," NBER Working Papers 27642, National Bureau of Economic Research, Inc.
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    16. Ye Li, 2018. "Fragile New Economy: The Rise of Intangible Capital and Financial Instability," 2018 Meeting Papers 1189, Society for Economic Dynamics.
    17. Nobuhiro Kiyotaki & Shengxing Zhang, 2018. "Intangibles, Inequality and Stagnation," Working Papers 2018-15, Princeton University. Economics Department..

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    More about this item

    Keywords

    intangible capital; Borrowing constraints; capital reallocation; secular stagnation;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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