Wall of Worries: Reflections on the Secular Stagnation Debate

Barry Eichengreen

No 15-E-05, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: This paper offers some reflections on the debate over secular stagnation. It expresses doubts about explanations for the secular decline in real interest rates and economic growth rates that emphasize the possibility of a global savings glut attributable to the rapid growth of emerging markets and increases in income inequality in the advanced economies. It invokes historical evidence to question whether the commercial potential of new advances in technology have been exhausted. The most convincing explanation for the observed excess of desired saving over desired investment and corresponding low level of real interest rates, it concludes, is probably a sharp, ongoing fall in the relative price of investment goods since the middle of the 20th century. Whether this decline will continue is uncertain. The bottom line is that the case for secular stagnation is at best unproven.

Keywords: Secular stagnation; Real interest rates; Economic growth (search for similar items in EconPapers)
JEL-codes: E00 N1 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-his and nep-mac
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Citations: View citations in EconPapers (2)

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