Aging, Secular Stagnation, and the Business Cycle

Callum Jones

The Review of Economics and Statistics, 2023, vol. 105, issue 6, 1580-1595

Abstract: By the end of 2019, U.S. output was 14% below the level predicted by its pre-2008 trend. To understand why, I develop and estimate a model of the United States with demographics, real and monetary shocks, and the occasionally binding zero lower bound on nominal rates. Demographic shocks generate slow-moving trends in interest rates, employment, and productivity. Demographics alone can explain about 40% of the gap between log output per capita and its linear trend by 2019. By lowering interest rates, demographic changes caused the zero lower bound to bind after the Great Recession, contributing to the slow recovery.

Date: 2023
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Working Paper: Aging, Secular Stagnation and the Business Cycle (2018)
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