They first establish a number of stylised facts: 1) the corporate investment rate was low in both the euro area and the US, with the share of intangibles (investment in intellectual property such as computer software and databases or research and development) increasing and the share of machinery and equipment decreasing; 2) corporate profits were low in the euro area and relatively high in the US; 3) Tobin’s Q (e.g.
A possible side effect of the low interest rate environment is that it may induce some asset and real estate market participants to engage in excessive risk taking. Excessive risk taking is most likely in those markets in which asset and real estate prices are already at elevated levels and/or rising quickly, tempting some participants to form optimistic beliefs on an extrapolative basis.