A BIS study[1] opines that business
investment has remained low in spite of unusually easy financing conditions
globally. Highly expansionary monetary policies have resulted in (a) low interest rates in capital markets, (b)
with corporate bond spreads at close to historically low levels (c) capital market borrowing has been cheap,
including for riskier borrowers, and also widely accessible (d) equity markets
in advanced economies have risen substantially in
an environment of low interest rates and strong risk appetite.
A plausible, explanation for slackness in
investment is that even if firms do have funds to invest, they are too uncertain about future economic
conditions and so whether the possible return on investment will justify
its cost.
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BIS Quarterly Review, March 2015 18 March 2015
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