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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

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