The expansionary monetary policy has little effect on private sector demand

We believe the main effect of an expansionary monetary policy is that it enables a larger fiscal deficit, but it has had little effect on private sector demand for goods and services: The household savings rate has not fall en with interest rates, probably due to the presence of income effects; Household housing investment is not stimulated by low interest rates when household debt has reached a ceiling; Corporate investment has not been stimulated by low interest rates because the marginal productivity of capital has not fallen with interest rates, which may be due to: Required return on equity habits; Higher risk premia; Monopoly rents.