The Slowdown and Asset Prices

Edmund Phelps, Hian Hoon and Gylfi Zoega ()
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Gylfi Zoega: University of Iceland

Chapter 3 in The Great Economic Slowdown, 2023, pp 31-48 from Springer

Abstract: Abstract One of the stylized facts of economic development in recent decades is the booming stock market. The implications of the slowdown in productivity growth for asset prices are derived using the “Austrian model,” where capital is produced only with labor in the investment-good sector and the consumer good is produced using only capital. A fall in the rate of both productivity and population growth lowers the real rate of interest and raises the price of capital by increasing the supply of wealth. In contrast, an increase in government debt drives up the real rate of interest, making the price of capital drop.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-31441-4_3

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DOI: 10.1007/978-3-031-31441-4_3

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