Published in:University of Chicago, Becker Friedman Institute for Economics Working Paper ; No. 2019-09
Extent:
1 Online-Ressource (89 p)
Language:
English
DOI:
10.2139/ssrn.3327402
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 28, 2019 erstellt
Description:
How does the production side of the economy respond to a low interest rate environment? This study provides a new theoretical result that low interest rates encourage market concentration by giving industry leaders a strategic advantage over followers, and this effect strengthens as the interest rate approaches zero. The model provides a unified explanation for why the fall in long-term interest rates has been associated with rising market concentration, reduced dynamism, a widening productivity-gap between industry leaders and followers, and slower productivity growth. Support for the model's key mechanism is established by showing that a decline in the ten year Treasury yield generates positive excess returns for industry leaders, and the magnitude of the excess returns rises as the Treasury yield approaches zero