Viral Acharya, Guillaume Plantin, 22 July 2020

In the aftermath of the 2008 Global Crisis, ultra-low US policy rates have been coincident with significantly large positive shareholder payouts by US firms while investment growth has failed to keep pace with firm assets, leading to assertions of a causal link between the two trends. This column uses a parsimonious model to explain how a socially undesirable yet shareholder value-maximising crowding out of business investment by payouts can arise as an unintended consequence of aggressive monetary easing.

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