Secular stagnation in an economy with land

Arbeitspapier

I present a model of secular stagnation with land and infinitely-lived agents with wealth preferences. Land is the prime example of a non-producible productive asset and rules out a negative real interest rate in steady state. With standard wealth preferences, higher land prices stimulate consumption and full employment is always feasible in steady state unless the central bank follows a deflationary policy. In contrast, secular stagnation emerges as the unique equilibrium of the monetary economy if wealth preferences are insatiable. In contrast to conventional wisdom, it is very existence of land itself that prevents full employment from being feasible in this case. Increases in the inflation target are no longer effective in restoring full employment as stagnation is a real phenomenon. These conclusions hold if households require a risk premium on land. Then, a higher risk premium can restore full employment when wealth preferences are insatiable.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 1032

Classification and Topics

• Classification: Wirtschaft ; Price Level; Inflation; Deflation ; Financial Markets and the Macroeconomy
• Subject: Secular Stagnation ; Wealth Preferences ; Rational Bubbles ; Land

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schlegl, Matthias
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/197704
• Last update: 10.03.2025, 11:41 AM CET