The global economy appears to be stuck in a pattern of low growth, low inflation and unresolved debt burdens. Is this a result of policy mistakes, or have the fundamental dynamics of the economy shifted into an era of little or no growth known as secular stagnation?
I have read the various conference papers and am struck by the fact that many use the (omnipresent New-Keynesian) model of an aggregate loanable funds market to diagnose secular stagnation and investigate possible remedies.
This paper replaces an earlier version of a paper released in 2014 under the title “A Model of Secular Stagnation.”
It is high time to ditch this myth for at least the following five reasons.
The financial system no longer funds new ideas and projects — only about 15 percent of the money coming out of financial institutions goes into business investment; the rest is spent buying and selling existing financial instruments.
Eight years after the crisis erupted, what the global economy is experiencing is starting to look less like a slow recovery than like a new low-growth equilibrium. With monetary policy unable to stimulate demand, or even inflation, it’s time for fiscal authorities to relieve the burden on central banks.
New topics and approaches make their way into two recent conferences on the history of economics