Hysteresis, Inflation, and Secular Stagnation

Gilles Dufrénot
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Gilles Dufrénot: Sciences Po Aix

Chapter Chapter 3 in New Challenges for Macroeconomic Policies, 2023, pp 73-145 from Springer

Abstract: Abstract This chapter reviews recent debates on the lasting effects of economic shocks that cause hysteresis and super-hysteresis in GDP. We provide an illustration of the implications of such phenomena on the trend GDP trajectories. We also discuss the following issues that have raised strong debates among economists. The first is whether growth in industrialized countries is job-creating (which leads to investigate the validity of Okun’s law). The second question concerns the Phillips curve and its usefulness to explain high and low inflation rates. We discuss the role of expectations, slack variables, and globalization variables. The third topic refers to secular stagnation. The aim is to explain the combination of three phenomena that characterize the new regime of advanced economies: potential growth that evolves along decreasing trajectories, interest rates that follow the same evolution, and core inflation that is far below central bank targets.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-15754-7_3

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DOI: 10.1007/978-3-031-15754-7_3

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