Accounting for the slowdown in output growth after the great recession: A wealth preference approach

Arbeitspapier

Previous studies have argued that output growth in advanced economies declined during the Great Recession and remained low afterward. This paper proposes a model to explain this slowdown in output growth. We incorporate wealth preferences and downward nominal wage rigidity into a standard monetary growth model. Our model demonstrates that output initially grows at the same rate as productivity and slows endogenously in the transition path to the stagnation steady state. This stagnation is persistent even if productivity continues to grow at a steady rate. Applying our model to US data, we show that it successfully explains the declines observed in the real interest rate, inflation, and the velocity of money, along with the slowdown in output growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 1174

Classification and Topics

• Classification: Wirtschaft ; Demand for Money ; Money and Interest Rates: Forecasting and Simulation: Models and Applications ; Economic Development: General
• Subject: Secular stagnation ; Wealth preferences ; Liquidity preferences ; the Great Recession ; Downward nominal wage rigidity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Inagaki, Kazuma ; Ono, Yoshiyasu ; Tsuruga, Takayuki
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/263309
• Last update: 10.03.2025, 11:43 AM CET