A Model of Secular Stagnation: Theory and Quantitative Evaluation
Gauti Eggertsson (),
Neil R. Mehrotra and
No 23093, NBER Working Papers from National Bureau of Economic Research, Inc
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: E31 E32 E5 E52 E58 E6 E62 (search for similar items in EconPapers)
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Published as Gauti B. Eggertsson & Neil R. Mehrotra & Jacob A. Robbins, 2019. "A Model of Secular Stagnation: Theory and Quantitative Evaluation," American Economic Journal: Macroeconomics, vol 11(1), pages 1-48.
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Journal Article: A Model of Secular Stagnation: Theory and Quantitative Evaluation (2019)
Working Paper: A Model of Secular Stagnation: Theory and Quantitative Evaluation (2017)
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