NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Secular Stagnation in the Open Economy

Gauti B. Eggertsson, Neil R. Mehrotra, Lawrence H. Summers

NBER Working Paper No. 22172
Issued in April 2016
NBER Program(s):   EFG   ME

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 trigger current account surpluses 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.

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Document Object Identifier (DOI): 10.3386/w22172

Published: Gauti B. Eggertsson & Neil R. Mehrotra & Lawrence H. Summers, 2016. "Secular Stagnation in the Open Economy," American Economic Review, vol 106(5), pages 503-507. citation courtesy of

 
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