Secular Stagnation in the Open Economy

Gauti Eggertsson, Neil R. Mehrotra and Lawrence Summers

No 22172, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Conditions of secular stagnation - low interest rates, below target inflation, and sluggish output growth – now characterize much of the global economy. We consider a simple two-country textbook model to examine how capital markets transmit secular stagnation and to study policy externalities across countries. We find capital flows transmit recessions in a world with low interest rates and that policies that trigger current account surpluses are beggar-thy-neighbor. Monetary expansion cannot eliminate a secular stagnation and may have beggar-thy-neighbor effects, while sufficiently large fiscal interventions can eliminate a secular stagnation and carry positive externalities.

JEL-codes: E31 E52 F3 F44 (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-mac, nep-opm and nep-pke
Note: EFG ME
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Citations: View citations in EconPapers (92)

Published as Gauti B. Eggertsson & Neil R. Mehrotra & Lawrence H. Summers, 2016. "Secular Stagnation in the Open Economy," American Economic Review, vol 106(5), pages 503-507.

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