Deflation and the Fisher equation
So, according to Irving Fisher, one reason to worry about deflation is that the federal funds rate is expected to be held near zero as the economy grows out of this recession.
Determinants of the Real Rate of Return: Evidence from Cross-Country Panel Data
This chapter analyzes the determinants of the ex ante real rate of return on bank deposits and equity. In the case of bank deposit rates, robust results include the lack of significance of money growth and a moderate role of foreign variables, with no significant role in particular for the world interest rate. In the case of stock returns, foreign variables also play a moderate role, with some international prices entering the regressions significantly and the world interest rate being statistically insignificant. This chapter also examines the effect of inflation on the unexplained component of equity returns. Current inflation is found not to have a significant effect on unexpected stock returns, which is consistent with the notion that equity provides a good hedge against inflation. Unexpected stock returns appear to react to contemporaneous information about foreign variables, albeit in ways that depend on the econometric specification of the model.
Maintenance and repair: too big to ignore
Most models of aggregate economic activity, like the standard neoclassical growth model, ignore the fact that equipment and structures are maintained and repaired. Once physical capital is purchased in these models, there are typically no more decisions made regarding its use. The theme of this article is that there is evidence to suggest that incorporating expenditures on the maintenance and repair of physical capital into models of aggregate economic activity will change the quantitative answers to some key questions that have been addressed with these models. This evidence is primarily from a little-used economywide survey in Canada. The survey shows that the activity of maintaining and repairing equipment and structures is an activity that is generally both large relative to investment and a substitute for investment to some extent—and to a large extent during some episodes.