But the more-prosaic prognostication—that further easing simply won’t stimulate slowing economies by reviving enfeebled corporate investment—may be the hardest-hitting retort from the perspective of central banks in the UK, euro-area and Japan. The report pleads with central banks to forgo further asset purchases, citing diminishing returns from such stimulus programmes and their questionable efficacy more generally. And high equity risk premia is a global issue, thereby discouraging capital-investment plans around the world. Debt-financed share buybacks by US companies—fueled by low policy rates—could also, over time, increase the equity risk premium, depending on the calculation model, other things being equal, Lorenzen added. More food for thought then for advanced-economy central banks as they meet this month.

Source: Mint September 06, 2016 11:37 UTC