A Model of Secular Stagnation: Theory and Quantitative Evaluation
By Gauti B. Eggertsson, Neil R. Mehrotra, Jacob A. Robbins. American Economic Journal: Macroeconomics, 2019
380 citations recorded by the source corpus.
This paper formalizes and quantifies the secular stagnation hypothesis, defined as a persistently low or negative natural rate of interest leading to a chronically binding zero lower bound (ZLB). Output-inflation dynamics and policy prescriptions are fundamentally different from those in the standard New Keynesian framework. Using a 56-period quantitative life cycle model, a standard calibration to US data delivers a natural rate ranging from − 1.5 percent to − 2 percent, implying an elevated risk of ZLB episodes for the foreseeable future. We decompose the contribution of demographic and technological factors to the decline in interest rates since 1970 and quantify changes required to restore higher rates. (JEL E12, E23, E31, E32, E43, E52)
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/6b6096e1c4e83c9f06f26888b8e57d3003a99d62
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Citations in the corpus
- Low Interest Rates, Market Power, and Productivity Growth (2019, background): “) as well as the level of GDP (Eggertsson, Mehrotra and Robbins (2017)). The model presented here proposes an explanation for secular stagnation that is distinct from the mechanisms discussed in the existing literature. As in the existing literature, the model assumes that the decline in long-term i”
- Global Waves of Debt: Causes and Consequences (2021, background): “For models involving currency crises, see Eichengreen, Rose, and Wyplosz (1995); Frankel and Rose (1996); and Kaminsky and Reinhart (2000). For models involving banking crises, see Borio and Lowe (2002); Demirgüç-Kunt and Detragiache (1998); and Rose and Spiegel (2012).”
- The State of New Keynesian Economics: A Partial Assessment (2018, background): “Thus, Eggertsson et al. (2017) develop a “quantitative” overlapping generations framework with nominal rigidities in order to understand the sources of the decline in the natural rate of interest in the US economy, and to analyze the implications of that decline for monetary policy.”