Paper #1487

Título:

Stagnation traps

Autores:

Gianluca Benigno y Luca Fornaro

Data:

Enero 2015

Resumen:

We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full employment because weak growth depresses aggregate demand and pushes the interest rate against the zero lower bound, while growth is weak because low aggregate demand results in low profits, limiting firms' investment in innovation. Policies aiming at restoring growth can successfully lead the economy out of a stagnation trap, thus rationalizing the notion of job creating growth.

Palabras clave:

Secular Stagnation, Liquidity Traps, Growth Traps, Endogenous Growth, Multiple Equilibria.

Códigos JEL:

E32, E43, E52, O42.

Área de investigación:

Macroeconomía y Economía Internacional

Publicado en:

Review of Economic Studies, 85 (3), 2018, 1425-1470

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