Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263309 
Year of Publication: 
2022
Series/Report no.: 
ISER Discussion Paper No. 1174
Publisher: 
Osaka University, Institute of Social and Economic Research (ISER), Osaka
Abstract: 
Previous studies have argued that output growth in advanced economies declined during the Great Recession and remained low afterward. This paper proposes a model to explain this slowdown in output growth. We incorporate wealth preferences and downward nominal wage rigidity into a standard monetary growth model. Our model demonstrates that output initially grows at the same rate as productivity and slows endogenously in the transition path to the stagnation steady state. This stagnation is persistent even if productivity continues to grow at a steady rate. Applying our model to US data, we show that it successfully explains the declines observed in the real interest rate, inflation, and the velocity of money, along with the slowdown in output growth.
Subjects: 
Secular stagnation
Wealth preferences
Liquidity preferences
the Great Recession
Downward nominal wage rigidity
JEL: 
E41
E47
O10
Document Type: 
Working Paper

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