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Secular Stagnation: Is it in the Data?

Author

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  • Kirikos, Dimitris G.

    (University of Applied Sciences Crete and Hellenic Open University)

Abstract

The anemic recovery of advanced economies, after eight years into the great recession, has recently been attributed to the persistent slump in demand and its effects on long-run growth rates through hysteresis effects. If adverse secular trends are at work, then the data should show that the long-run growth rate has shifted to a lower level. Hence, using a simple Markov switching regimes model, we investigate whether the growth rate of potential GDP has exhibited a persistent switch, based on OECD data for nine economies over the period 1990-2017. It turns out that, in all cases, potential GDP growth is characterized by switching dynamics and this provides necessary evidence that secular stagnation cannot be ruled out empirically. Una stagnazione secolare è nei fatti? La anemica ripresa delle economie avanzate dopo otto anni di grande recessione è stata recentemente attribuita al persistente calo della domanda ed ai suoi effetti sulla crescita nel lungo periodo tramite effetti di isteresi. Se intervenissero tendenze secolari contrarie, allora i dati dovrebbero mostrare che i tassi di crescita nel lungo periodo sono diminuiti. Di conseguenza, usando un modello Markoviano a regime variabile, si analizza se il tasso di crescita del PIL potenziale ha evidenziato una variazione persistente, basandosi su dati OCSE relativi a nove economie nel periodo 1990-2017. Vi sono evidenze che per tutti i paesi la crescita del PIL potenziale è caratterizzata da dinamiche variabili e ciò indica che la stagnazione secolare non può essere empiricamente esclusa.

Suggested Citation

  • Kirikos, Dimitris G., 2017. "Secular Stagnation: Is it in the Data?," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 70(4), pages 411-418.
  • Handle: RePEc:ris:ecoint:0810
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    References listed on IDEAS

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    1. Stephanie Lo & Kenneth Rogoff, 2015. "Secular stagnation, debt overhang and other rationales for sluggish growth, six years on," BIS Working Papers 482, Bank for International Settlements.
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    Cited by:

    1. Kirikos, Dimitris G., 2020. "Quantitative easing impotence in the liquidity trap: Further evidence," Economic Analysis and Policy, Elsevier, vol. 68(C), pages 151-162.
    2. Wang, Lu & Wu, Jiangbin & Cao, Yang & Hong, Yanran, 2022. "Forecasting renewable energy stock volatility using short and long-term Markov switching GARCH-MIDAS models: Either, neither or both?," Energy Economics, Elsevier, vol. 111(C).

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    More about this item

    Keywords

    Secular Stagnation; Switching Regime; Long-run Growth;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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