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Secular stagnation or financial cycle drag?

Secular stagnation or financial cycle drag? Abstract This speech compares and contrasts two different interpretations of the current plight of the global economy. It argues that the world has been suffering not so much from a structural deficiency in aggregate demand—secular stagnation—but from the aftermath of financial booms gone wrong—financial cycle drag. This perspective suggests that the very low levels of interest rates that have prevailed are not necessarily equilibrium ones—consistent with the “natural rate”. And although it indicates that the headwinds from the financial bust, while very persistent, are temporary, it also points to a number of material risks ahead: further episodes of financial distress, a “debt trap” and, ultimately, a rupture in the open global economic order. To limit these risks, policies should be rebalanced towards structural measures and address more systematically the financial cycle. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Business Economics Springer Journals

Secular stagnation or financial cycle drag?

Business Economics , Volume 52 (2): 12 – Apr 1, 2017

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Publisher
Springer Journals
Copyright
2017 National Association for Business Economics
ISSN
0007-666X
eISSN
1554-432X
DOI
10.1057/s11369-017-0035-3
Publisher site
See Article on Publisher Site

Abstract

Abstract This speech compares and contrasts two different interpretations of the current plight of the global economy. It argues that the world has been suffering not so much from a structural deficiency in aggregate demand—secular stagnation—but from the aftermath of financial booms gone wrong—financial cycle drag. This perspective suggests that the very low levels of interest rates that have prevailed are not necessarily equilibrium ones—consistent with the “natural rate”. And although it indicates that the headwinds from the financial bust, while very persistent, are temporary, it also points to a number of material risks ahead: further episodes of financial distress, a “debt trap” and, ultimately, a rupture in the open global economic order. To limit these risks, policies should be rebalanced towards structural measures and address more systematically the financial cycle.

Journal

Business EconomicsSpringer Journals

Published: Apr 1, 2017

References