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What if the problem after the subprime crisis was simply insufficient corporate investment?
When we look at the net corporate investment rate in OECD countries (and not gross, to take into account capital depreciation) in nominal terms (and not in real terms, due to the arbitrary nature of measuring quality effects), we see a decline after the subprime crisis, which is consistent with the slowdown in net corporate capital growth. Insufficient investment after the subprime crisis may therefore explain the slowdown in per capita productivity and potential growth. It is therefore important to understand why companies did not invest enough after the subprime crisis: Not because profitability was too low ; it was actually high; Perhaps due to risk aversion and irreversible decisions after the crisis, which is consistent with the accumulation of cash reserves; Probably also due to the very high level of the required return on equity.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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