However, the stimulative effect of productivity growth on demand appears to have been weaker than normal in recent years (Kohn, 2003). Also, the conclusion that productivity growth has contributed to weak job growth in the short run is in no way inconsistent with the view that productivity growth raises wages and living standards in the long run, when full employment has been restored.
Overall, the pre-crisis slowdown in potential growth, coupled with the negative effects of the crisis on investment and private sector balance sheets, has resulted in an imbalance between saving and investment, and largely accounts for the decline in the real interest rate to very low levels.