A Model of Secular Stagnation : Theory and Quantitative Evaluation

  title={A Model of Secular Stagnation : Theory and Quantitative Evaluation},
  author={Gauti B. Eggertsson and Brown},
  • Gauti B. Eggertsson, Brown
  • Published 2016
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… CONTINUE READING
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