This is different from hysteresis effects, where some observers argue that we are permanently entering a “1% economy” of low growth, low inflation and low neutral rates of interest as firms invest less in new capacity and technology, causing productivity growth to stabilise at lower levels and weak potential growth to become self-fulfilling.
This is rather about the timing of investment: the coincidence of a protracted period of weak demand and major transformative technological breakthroughs may have further delayed closing what some call the “innovation gap” – the distance to the technological frontier.20 In the euro area, for example, the double dip of the great financial crisis and the sovereign debt crisis may have delayed investment in new technologies.