Secular Stagnation: Insights from a New Keynesian Model with Hysteresis Effects
CESifo, Munich, 2016
CESifo Working Paper No. 5797
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To analyse the most important aspects of the Secular Stagnation hypothesis, this paper considers the effects of hysteresis in potential output in a New-Keynesian model that is extended with endogenous potential output. To do so, a number of simulations of relevant scenarios is undertaken. It is demonstrated that extending the New-Keynesian model with hysteresis has a number of crucial implications for macro-economic adjustment and macro-economic management. It is indicated how the model can contribute to a better understanding of a number of important elements of the Secular Stagnation hypothesis.
Fiscal Policy, Macroeconomics and Growth
Monetary Policy and International Finance