Stagnation traps

Benigno, Gianluca; Fornaro, Luca

dc.contributor.author	Benigno, Gianluca
dc.contributor.author	Fornaro, Luca
dc.date.accessioned	2019-05-24T12:33:27Z
dc.date.available	2019-05-24T12:33:27Z
dc.date.issued	2018
dc.identifier.citation	Benigno G, Fornaro L. Stagnation traps. The Review of Economic Studies. 2018 Jul;85(3):1425-70. DOI: 10.1093/restud/rdx063
dc.identifier.issn	0034-6527
dc.identifier.uri	http://hdl.handle.net/10230/37293
dc.description.abstract	We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent, slumps characterized by high unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full employment because weak growth depresses aggregate demand and pushes the policy rate against the zero lower bound, while growth is weak because low aggregate demand results in low profits, limiting firms’ investment in innovation. Aggressive policies aiming at restoring growth, such as subsidies to investment, can successfully lead the economy out of a stagnation trap by generating a regime shift in agents’ growth expectations.
dc.description.sponsorship	This research has been supported by the ESRC British Academy Mid-Career Fellowship grant ES/I024174/1, the Spanish Ministry of Science and Innovation (grant ECO2011-23192), the Fondation Banque de France Research Grant, the CERCA Programme/Generalitat de Catalunya and the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563).
dc.format.mimetype	application/pdf
dc.language.iso	eng
dc.publisher	Oxford University Press
dc.relation.ispartof	The Review of Economic Studies. 2018 Jul;85(3):1425-70
dc.rights	© Oxford University Press. This is a pre-copyedited, author-produced version of an article accepted for publication in The Review of Economic Studies following peer review. The version of record Benigno G, Fornaro L. Stagnation traps. The Review of Economic Studies. 2018 Jul;85(3):1425-70 is available online at: https://dx.doi.org/10.1093/restud/rdx072
dc.title	Stagnation traps
dc.type	info:eu-repo/semantics/article
dc.identifier.doi	http://dx.doi.org/10.1093/restud/rdx063
dc.subject.keyword	Secular stagnation
dc.subject.keyword	Liquidity traps
dc.subject.keyword	Endogenous growth
dc.subject.keyword	Monetary policy
dc.subject.keyword	Multiple equilibria
dc.subject.keyword	Hysteresis
dc.relation.projectID	info:eu-repo/grantAgreement/ES/3PN/ECO2011-23192
dc.rights.accessRights	info:eu-repo/semantics/openAccess
dc.type.version	info:eu-repo/semantics/acceptedVersion