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Secular Stagnation in Non-EMU European Countries : Equilibrium Real Rate Approach

Author

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  • Klose, Jens

    (THM Business School)

Abstract

Concerns about economies facing secular stagnation—a period of persistently lower growth—have been renewed after the start of the financial crisis in 2008~2009. This issue is well investigated for the euro area as a whole or for the individual countries forming the monetary union, with the general consensus being that secular stagnation is not present in the Economic and Monetary Union (EMU). So far no studies have been conducted for the remaining European countries, and thus this study tackles this issue for the five non-EMU European countries using the well-established Laubach–Williams model to estimate the unobservable equilibrium real interest rate and compare it with the actual real rate. The obtained results have important implications for national policymakers, i.e., if secular stagnation is present in one country, then there is a risk of growth divergence with the country’s most important trading partners. The results also indicate that secular stagnation is not a significant threat to the non-EMU European countries, so they do not face structurally different growth dynamics compared with those of the euro area.

Suggested Citation

  • Klose, Jens, 2017. "Secular Stagnation in Non-EMU European Countries : Equilibrium Real Rate Approach," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 32(2), pages 400-432.
    • Handle: RePEc:ris:integr:0716
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    Cited by:

    1. Belke, Ansgar & Klose, Jens, 2018. "Equilibrium Real Interest Rates, Secular Stagnation, and the Financial Cycle: Empirical Evidence for Euro-Area Member Countries," GLO Discussion Paper Series 182, Global Labor Organization (GLO).
    2. Belke, Ansgar & Klose, Jens, 2020. "Equilibrium real interest rates and the financial cycle: Empirical evidence for Euro area member countries," Economic Modelling, Elsevier, vol. 84(C), pages 357-366.
    3. Agnieszka Gehringer & Thomas Mayer, 2019. "Understanding low interest rates: evidence from Japan, Euro Area, United States and United Kingdom," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(1), pages 28-53, February.
    4. Klose, Jens, 2020. "Equilibrium real interest rates for the BRICS countries," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).

    More about this item

    Keywords

    Equilibrium Real Interest Rate; Secular Stagnation; Non-EMU European Countries;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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