Long-lasting consequences of the European crisis

Juan F Jimeno

No 1522, Working Papers from Banco de España

Abstract: The Great Recession and the subsequent European crisis may have long-lasting effects on aggregate demand, aggregate supply and, hence, on macroeconomic performance over the medium and long run. Besides the fact that financial crises last longer and are succeeded by slower recoveries, and apart from the hysteresis effects that may operate after episodes of long-term unemployment, the combination of high (public and private) debt and low population and productivity growth may create significant constraints for monetary and fiscal policies. In this paper I develop an OLG model, one earlier used by Eggertsson and Mehrotra (2014) to rationalise the «secular stagnation hypothesis», to show how high debt and low population and productivity growth may condition the macroeconomic performance of some European countries over the medium and long run.

Keywords: natural rate of interest; zero lower bound; population and productivity growth; inter-generational transfers; secular stagnation. (search for similar items in EconPapers)
JEL-codes: E20 E43 E52 E66 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2015-08
New Economics Papers: this item is included in nep-dge, nep-eec, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Long-lasting consequences of the European crisis (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1522

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