The extra productive capacity created by those investments, together with a recovery whose durability in the early stages was not assured, may have implied little need for further investment, at least until relatively recently.
Whatever the cause, the weaker response of spending in the more-recent period, coupled with impressive gains in productivity, helped to generate both a pattern of slow job growth (the “jobless recovery”) and the worrisome decline in inflation in 2003. What are the implications of these observations for current monetary policy?