Population growth, saving, interest rates and stagnation: Discussing the Eggertsson-Mehrotra model

Peter Spahn

No 04-2016, Hohenheim Discussion Papers in Business, Economics and Social Sciences from University of Hohenheim, Faculty of Business, Economics and Social Sciences

Abstract: Post Keynesian stagnation theory argues that slower population growth dampens consumption and investment. A New Keynesian OLG model derives an unemployment equilibrium due to a negative natural rate in a three-generations credit contract framework. Besides deleveraging or rising inequality, also a shrinking population is a triggering factor. In all cases, a saving surplus drives real interest rates down. In other OLG settings however, with bonds as stores of value, slower population growth, on the contrary, causes a lack of saving and thus rising rates. Moreover, the recent fall in market interest rates was brought about by monetary factors.

Keywords: overlapping generations; zero lower bound; deflation equilibrium; natural versus market interest rates (search for similar items in EconPapers)
JEL-codes: E12 E21 E43 J11 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-lab, nep-mac and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:hohdps:042016

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