A Model of Secular Stagnation: Theory and Quantitative Evaluation

Gauti Eggertsson, Neil R. Mehrotra and Jacob Robbins

American Economic Journal: Macroeconomics, 2019, vol. 11, issue 1, 1-48

Abstract: This paper formalizes and quantifies the secular stagnation hypothesis, defined as a persistently low or negative natural rate of interest leading to a chronically binding zero lower bound (ZLB). Output-inflation dynamics and policy prescriptions are fundamentally different from those in the standard New Keynesian framework. Using a 56-period quantitative life cycle model, a standard calibration to US data delivers a natural rate ranging from −1.5% to −2%, implying an elevated risk of ZLB episodes for the foreseeable future. We decompose the contribution of demographic and technological factors to the decline in interest rates since 1970 and quantify changes required to restore higher rates.

JEL-codes: E12 E23 E31 E32 E43 E52 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/mac.20170367
References: Add references at CitEc
Citations: View citations in EconPapers (215)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20170367 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... zNls3SMk8mMZ9-duVOA0 (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... g5tqW2_eunTlEpqxM3-d (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... RkEiVbjGq0ajk2J-3dQj (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: A Model of Secular Stagnation: Theory and Quantitative Evaluation (2017)
Working Paper: A Model of Secular Stagnation: Theory and Quantitative Evaluation (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:11:y:2019:i:1:p:1-48

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().