Secular stagnation requires rethinking macroeconomic. The project officially started with a discussion between summers and turner moderated by rob johnson in the fall of 2016 in washington d. The economist explains what it means to suffer from secular stagnation. Rethinking macroeconomic policy after the great recession, a volume containing the papers and discussions we organized at a peterson institute conference held 18 months ago. Summers the nature of macroeconomics has changed dramatically in the last seven years. Secular stagnation is not inevitable, summers wrote earlier this week. Though the consensus around what secular stagnation means is loose, one factor almost everyone agrees on is the lack of population growth that concerned hansen has reemerged as a problem. There has been an outpouring of chat in both policy circles and the blogosphere concerning secular stagnation.
Summers published an article title, the age of secular stagnation. How to tackle secular stagnation world economic forum. He argues for more government demand stimulus as a solution. Eliot university professor and president emeritus at harvard university. Oct 30, 2014 the notion that europe and other advanced economies are suffering secular stagnation is gaining traction. Secular stagnation and monetary policy by lawrence h. Secular stagnation refers to the idea that the normal, selfrestorative properties of the economy might not be sufficient to allow sustained full employment along with financial. Section ii relates this very poor performance to the zero lower bound on nominal interest rates and the secular stagnation hypothesis. The idea of secular stagnation dates to alvin hansen, who wrote in the 1930s that it was possible for privatesector investment demand to. He points to factors, such as ineffective monetary policy and weak demand for. Secular stagnation meets the headwinds 47 robert j gordon 4 four observations on secular stagnation 61. After summers, krugman started to surmise that the economy may have been experiencing secular stagnation since 1985, and that only the rise in household debt masked this phenomenon. On falling neutral real rates, fiscal policy, and the risk. Capital misallocation and secular stagnation caggese and perezorive 2017 2017009 please cite this paper as.
On secular stagnation in the industrialized world lukasz rachel, lawrence h. Mar 25, 2016 though the consensus around what secular stagnation means is loose, one factor almost everyone agrees on is the lack of population growth that concerned hansen has reemerged as a problem. Consequently the level and rate of change of private debt could have been macroeconomically significant not merely since 2008, but since as long ago as 1985. The scary debate over secular stagnation milken institute. Of these, the most controversy has been generated by summerss secularstagnation thesis. Despite the prominence of summers discussion of the secular stagnation hypothesis and a. Larry summers is the secular stagnation that burdens us. There is a lot of confusion what secular stagnation really means. Ar interpret their empirical evidence as contradicting the socalled secular stagnation ypothesis h see summers 20, 2014 or eggertsson and mehrotra 2014 because the secular stagnation hypothesis is often tied to aging, while the secular stagnation itself is a story about subpar output growth. The article explores how expansionary fiscal policy by the u. July 4, 2014 abstract in this paper we propose a simple overlapping generations new keynesian model in which a permanent or very persistent slump is possible.
Aug 10, 2016 summers points to secular stagnation as his explanation for a lowgrowth world, but explicit in such a view is that individuals around the world have run out of ideas such that theres lots of. Secular stagnation effects on financial markets seeking alpha. Ben bernanke and larry summers are in a blog war over secular. Paper presented at the fifth graz schumpeter summer school, economic stagnation. Point of view accepting the reality of secular stagnation. On secular stagnation in the industrialized world brookings.
Problematic postcrisis economic performance in the industrial world ii. The economist explains what it means to suffer from. Oct 12, 2017 secular stagnation is a term coined to describe a prolonged period of lower economic growth. We look at what impact secular stagnation has on asset prices. Summers harvard university on secular stagnation in the industrialized world abstract we argue that the. Alvin hansen coined the term in his 1938 american economic association presidential address hansen, 1939, and lawrence summers 2014 resurrected it in reference to the sluggish. Secular stagnation institute for new economic thinking. Aug 20, 2014 there is a lot of confusion what secular stagnation really means.
The cepr press ebook on secular stagnation has been viewed over 80,000 times since it was published on 15 august 2014. However, the economist criticizes secular stagnation as a baggy concept, arguably too capacious for its own good. Lawrence summers deserves a nobel prize for reviving the. Ben bernanke and larry summers are in a blog war over. Secular stagnation and macroeconomic policy springerlink.
Summers t he past decade has been a tumultuous one for the us economy, characterized by the buildup of huge excesses in financial markets during the 20012007 period. New approaches are needed to deal with sluggish growth, low interest rates, and an absence of inflation lawrence h. Chapter 2 low equilibrium real rates, financial crisis, and. Summers this article is based on the authors homer jones memorial lecture delivered at the federal reserve bank of st. Economists, such as larry summers have written on secular stagnation arguing the world has entered a period of substantially lower economic growth. Pdf secular stagnation and the discourse of reproductive. Larry summers 2014, 2016 has argued that we are in a new era of secular stagnation. His by now familiar narrative focuses on the failure of interest rates and in an open economy, the real exchange rate to equilibrate aggregate demand and. Secular stagnation and the discourse of reproductive limit. Secular stagnation and monetary policy federal reserve bank of. Chapter 2 low equilibrium real rates, financial crisis.
Indeed, the private sector has undertaken large capital outlays since the end of the recession. The risk to our economy from secular stagnation the. Secular stagnation, hysteresis, and the zero lower bound lawrence h. This column by larry summers first published in the vox ebook secular stagnation. Apr 01, 2015 ben bernanke and larry summers are in a blog war over secular stagnation. Ben bernanke and larry summers are in a blog war over secular stagnation. Larry summers has revived the notion of secular stagnation that goes back to alvin hansen. Gordon alvin hansen 1939 popularized the term secular stagnation, and we are now, at the suggestion of larry summers 2014, considering the application of hansens term to the current us economy, because the pace of out. Secular stagnation and macroeconomic policy mundellfleming lecture international monetary fund. Summers points to secular stagnation as his explanation for a lowgrowth world, but explicit in such a view is that individuals around. Now, instead of being concerned with minor adjustments to stabilize about a given trend, concern is focused on avoiding secular stagnation. But averting it requires making the right policy choices, ending the disastrous trend towards ever less government.
Section iii responds to a variety of questions and challenges raised about the secular. Returns on government debt bear little resemblance to returns on productive capital. The economics of secular stagnation secular stagnation. I have taken the liberty to transcribe summers answer i added line breaks and numbers from 1 to 5 to distinguish the five possible causes mentioned by summers. Summers harvard university on secular stagnation in the industrialized world abstract we argue that the economy of the industrialized world, taken.
On falling neutral real rates, fiscal policy, and the risk of secular. Sep 03, 2019 you may be experiencing secular stagnation. E31,e32,e52 abstract we propose an overlapping generations new keynesian model in which a permanent or very persistent. Given that many aspects of the secular stagnation debate now find increasing empirical support, i argue that summers deserves to win the nobel prize in economics on the grounds of reviving a oncedismissed theory and initiating the most important macroeconomic debate of our times. The world economic forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. In summers 2014a, 2014b we can find a clear cut summing up of the main concerns and propositions of the former us treasury minister. Economic fluctuations and growth, international finance and macroeconomics, monetary economics we argue that the economy of the industrialized world taken as a whole is currently and for the foreseeable. Secular stagnation is a term coined to describe a prolonged period of lower economic growth. The evidence on investment strongly suggests otherwise. Jan 07, 2014 secular stagnation is not inevitable, summers wrote earlier this week. What it is and what to do about it, in the february issue of foreign affairs. Secretary lawrence summers calls for broad structural shifts in government policy to deal with secular stagnation. Secular stagnation effects on financial markets seeking.
Problems of theory and policyfrom malthus to piketty, july 1218. And this, according to summers, has profound implications for the conduct of monetary. Summers 2014 and others have articulated the secular stagnation hypothesis based on insufficient aggregate demand. Aging, output per capita and secular stagnation gauti b. Secular stagnation theory has developed substantially recently and offers substantial insights that policymakers have yet to fully internalize. Summers purchase article listen to article purchase audio as surprising as the recent financial crisis and recession were, the behavior of the worlds industrialized economies and financial markets during the recovery has been even more so. Secular stagnation was dusted off by hanswerner sinn in a 2009 article dismissing the threat of inflation, and became popular again when larry summers invoked the term and concept during a 20 speech at the imf. New approaches are needed to deal with sluggish growth, low interest rates, and. The age of secular stagnation what it is and what to do about it by lawrence h. Freeland asks summers about the causes of secular stagnation at 28 minutes, 23 seconds in the video. Secular stagnation requires rethinking macroeconomic policy. The pdf remains freely downloadable, but as the european debate on secular stagnation is moving into policy circles, we decided to also make it a kindle book.
On falling neutral real rates, fiscal policy, and the risk of. But averting it requires making the right policy choices, ending the. Mar 07, 2019 the idea of secular stagnation dates to alvin hansen, who wrote in the 1930s that it was possible for privatesector investment demand to fall far short of privatesector saving and that interest. Secular stagnation and returns on capital economic. Planet money symptoms include persistently low interest rates and mediocre economic growth. Section ii relates this very poor performance to the zero lower bound on nominal interest rates and the secular stagnation hypothe. Low equilibrium real rates, financial crisis, and secular stagnation lawrence h. Potential growth, effective demand, and sclerosis 2 secular stagnation. Following his consequential speech at the imf, a large macroeconomic literature in new keynesian economics has emerged on the secular stagnation. Please see this link for a video of the discussion. Incorporated as a notforprofit foundation in 1971, and headquartered in geneva, switzerland, the forum is tied to no political, partisan or national interests. Krugman 20, taylor 2014, delong 2014 for a few examples, there has not, to the best of our knowledge, been any attempt to formally. Reflections on secular stagnation princeton university. Potential output might be growing but actual output falls short, resulting in high unemployment and.
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