Re: Re: Re: Re: Robert Glenn Hubbard

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

At 05:41 PM 2/28/01 -0500, you wrote:
> Jim Devine wrote:
>
> > Brad writes:
> > > Even the stuff about how corporate investment is determined not by
> > > interest rates but by corporate cash flow?
> >
> > that's interesting (though likely not to Louis). So the CEA might be led
> > by someone who thinks that monetary policy isn't very effective?
>
> Well maybe it isn't, or at least its effectiveness isn't transmitted
> through corporate investment via interest rates. It is a pretty
> well-established fact that cash flow is a far more powerful determinant of
> investment than interest rates, isn't it?

yeah, I think so, but there are a lot of economists who emphasize relative
prices (like the interest rate) as crucial über alles.

On the first point, I agree, too: interest rate cuts can stimulate the
economy by encouraging investment in housing (unless there's been
overbuilding, the banks have seen too many housing loans go bad, and/or
home-buyers are overwhelmed by debt or pessimism) or via forex markets
promoting exports (unless other countries cut rates too).

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine