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Yes, Eugene, which is why I stress pro-cyclicality. We saw this in Japan in the 1980s. When the economy is expected to grow rapidly, the future benefits of current infrastructure spending are of course higher than when it is expected to grow slowly. But it makes a big... https://twitter.com/EugeniuHan/status/1354710562974785540
Yes, Eugene, which is why I stress pro-cyclicality. We saw this in Japan in the 1980s. When the economy is expected to grow rapidly, the future benefits of current infrastructure spending are of course higher than when it is expected to grow slowly. But it makes a big... https://twitter.com/EugeniuHan/status/1354710562974785540
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difference if current growth has been sharply boosted by spending on infrastructure, in which case the evaluation becomes circular: more infrastructure spending today boosts growth today, which boosts future growth expectations, which justifies more infrastructure spending.
difference if current growth has been sharply boosted by spending on infrastructure, in which case the evaluation becomes circular: more infrastructure spending today boosts growth today, which boosts future growth expectations, which justifies more infrastructure spending.
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The problem is that this can work in reverse too. If growth slows, the value of infrastructure drops, which forces losses that reduce demand and so growth slows even further. It can be a highly self-reinforcing process.
The problem is that this can work in reverse too. If growth slows, the value of infrastructure drops, which forces losses that reduce demand and so growth slows even further. It can be a highly self-reinforcing process.
