American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Secular Stagnation in the Open Economy
American Economic Review
(pp. 503–07)
Abstract
Conditions of secular stagnation—low interest rates, below target inflation, and sluggish output growth—now characterize much of the global economy. We consider a simple two-country textbook model to examine how capital markets transmit secular stagnation and to study policy externalities across countries. We find capital flows transmit recessions in a world with low interest rates and that policies that attempt to boost national saving are beggar-thy-neighbor. Monetary expansion cannot eliminate a secular stagnation and may have beggar-thy-neighbor effects, while sufficiently large fiscal interventions can eliminate a secular stagnation and carry positive externalities.Citation
Eggertsson, Gauti B., Neil R. Mehrotra, and Lawrence H. Summers. 2016. "Secular Stagnation in the Open Economy." American Economic Review 106 (5): 503–07. DOI: 10.1257/aer.p20161106Additional Materials
JEL Classification
- E23 Macroeconomics: Production
- E31 Price Level; Inflation; Deflation
- E32 Business Fluctuations; Cycles
- E43 Interest Rates: Determination, Term Structure, and Effects
- E52 Monetary Policy
- E62 Fiscal Policy
- F41 Open Economy Macroeconomics