What question did this study set out to answer?

To formalize and quantitatively assess the secular stagnation hypothesis by modeling the drivers of persistently negative natural interest rates and binding zero lower bound constraints.

September 6, 2017Open Access

A Model of Secular Stagnation: Theory and Quantitative Evaluation

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Authors

GEGauti B. EggertssonJohn Brown University NMNeil MehrotraFederal Reserve Bank of Minneapolis JRJacob A. RobbinsUniversity of Illinois Chicago

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Implication

Macroeconomic modeling reveals a negative natural interest rate in the United States, indicating sustained vulnerability to zero lower bound constraints.

Key Points

To formalize and quantitatively assess the secular stagnation hypothesis by modeling the drivers of persistently negative natural interest rates and binding zero lower bound constraints.
Constructed a 56-period quantitative life-cycle model incorporating demographic and technological dynamics.
Calibrated the model parameters to United States macroeconomic data spanning from 1970 onward.
Baseline calibration generated an equilibrium natural rate of interest between -1.5% and -2%.
Demographic transitions and technological slowdown accounted for the primary decline in interest rates since 1970.
Persistent negative natural rates generated chronically binding zero lower bound episodes, shifting standard output-inflation policy dynamics.

Cite This Study

Eggertsson et al. (2017) studied this question.

synapsesocial.com/papers/6a8653f3894d3eb3a35aeeaf https://doi.org/10.21034/wp.742

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Implication

Macroeconomic modeling reveals a negative natural interest rate in the United States, indicating sustained vulnerability to zero lower bound constraints.

A Model of Secular Stagnation: Theory and Quantitative Evaluation

Discussion

Member takes

Implication

Key Points

Cite This Study

A Model of Secular Stagnation: Theory and Quantitative Evaluation

Discussion

Member takes

Implication

Key Points

Cite This Study

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