NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Łukasz Rachel

Bank of England
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Institutional Affiliation: London School of Economics

NBER Working Papers and Publications

August 2019On Secular Stagnation in the Industrialized World
with Lawrence H. Summers: w26198
We argue that the economy of the industrialized world taken as a whole is currently – and for the foreseeable future will remain – highly prone to secular stagnation. But for extraordinary fiscal policies, real interest rates would have fallen much more and be far below their current slightly negative level, current and prospective inflation would be further short of the two percent target levels and past and future economic recoveries would be even more sluggish. We start by arguing that, contrary to current practice, neutral real interest rates are best estimated for the bloc of all industrial economies given capital mobility between them and relatively limited fluctuations in their aggregated current account. We show, using standard econometric procedures and looking at direct market in...
 
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