Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197704 
Year of Publication: 
2018
Series/Report no.: 
ISER Discussion Paper No. 1032
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
I present a model of secular stagnation with land and infinitely-lived agents with wealth preferences. Land is the prime example of a non-producible productive asset and rules out a negative real interest rate in steady state. With standard wealth preferences, higher land prices stimulate consumption and full employment is always feasible in steady state unless the central bank follows a deflationary policy. In contrast, secular stagnation emerges as the unique equilibrium of the monetary economy if wealth preferences are insatiable. In contrast to conventional wisdom, it is very existence of land itself that prevents full employment from being feasible in this case. Increases in the inflation target are no longer effective in restoring full employment as stagnation is a real phenomenon. These conclusions hold if households require a risk premium on land. Then, a higher risk premium can restore full employment when wealth preferences are insatiable.
Subjects: 
Secular Stagnation
Wealth Preferences
Rational Bubbles
Land
JEL: 
E31
E44
Document Type: 
Working Paper

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