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
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)
New Economics Papers: this item is included in nep-lab, nep-mac and nep-pke
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Persistent link: http://EconPapers.repec.org/RePEc:zbw:hohdps:042016
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