“Cutting taxes on business investment is an effective form of economic stimulus that could go a long way toward mending the damage from the financial crisis and Great Recession, a top Federal Reserve official said on Saturday.

“In prepared remarks that did not touch on monetary policy, Minneapolis Federal Reserve Bank President Narayana Kocherlakota told a National Bureau of Economic Research conference that even apparently permanent damage to the economy can be reversed if policymakers are willing to take appropriate steps.

“The U.S. economy was hit hard by the 2007-2009 financial crisis and the ensuing recession, with output last year 13 percent below where it had been before the crisis.

“Although high unemployment has received the most policy attention, spurring unprecedented amounts of monetary accommodation from the U.S. central bank, the biggest drag on growth has actually been a decline in business capital, according to research presented at the conference by Stanford University professor Robert Hall.”

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