Indeed, there is evidence that creative destruction was weaker during the recession than in previous downturns2 and that zombie firms have weighed on productivity growth in some euro area countries3. Productivity growth plays an important role in the conduct of monetary policy. Higher productivity growth spurs investment, and expectations of higher future income encourage consumers to spend more today.
For monetary policy, the distinction between supply and demand matters much along the same lines I described before. Falling oil prices, for example, are often a symptom of a broader weakness in global aggregate demand, in which case they send important signals for monetary policy in real time.