Mismeasurement may cause ‘missing-investment puzzle’ – BoE’s Bailey
A failure to properly measure intangible investment could account for a “missing-investment puzzle” in the UK and other advanced economies, Bank of England governor Andrew Bailey said on July 12.
Bailey noted standard neoclassical theory suggests there should be a “strong co-movement” between risk-free rates and the return on capital. But in recent years, a wedge has opened up as long-run rates have fallen, but the return on capital has remained steady. The wedge has grown by about five
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