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Equilibrium Real Interest Rates and Secular Stagnation: An Empirical Analysis for Euro-Area Member Countries

Ansgar Belke () and Jens Klose ()

No 201712, ROME Working Papers from ROME Network

Abstract: Is secular stagnation—a period of persistently lower growth such as that seen following the financial crisis of 2008/09—a valid concern for euro-area countries? We tackle this question using the well-established Laubach-Williams model to estimate the unobservable equilibrium real interest rate and compare it to the actual real rate. In light of the considerable increase in heterogeneity among EU member countries since the beginning of the financial crisis, we apply our approach to twelve euro-area countries to provide country-level answers to the question of secular stagnation. The presence of secular stagnation in a number of euro-area countries has important implications for ECB decision-making (i.e., voting power in the Governing Council) and EU governance. Our results indicate that secular stagnation is not a significant threat to most euro-area countries, with one possible exception: Greece.

Keywords: equilibrium real interest rate; secular stagnation; euro-area countries; heterogeneity (search for similar items in EconPapers)
JEL-codes: E43 F45 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
Date: 2017-12
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http://www.rome-net.org/RePEc/rmn/wpaper/rome-wp-2017-12.pdf First version, 2017 (application/pdf)

Related works:
Journal Article: Equilibrium Real Interest Rates and Secular Stagnation: An Empirical Analysis for Euro Area Member Countries (2017) Downloads
Working Paper: Equilibrium real interest rates and secular stagnation: An empirical analysis for euro area member countries (2016) Downloads
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