Aging, Secular Stagnation and the Business Cycle

As of 2015, U.S. log output per capita was 12 percent below what its pre-2008 linear trend would predict. To understand why, I develop and estimate a model of the US with demographics, real and monetary shocks, and the occasionally binding ZLB on nominal rates. Demographic changes generate slow-moving trends in the real interest rate, employment, and productivity. I find that demographics alone can explain one-third of the gap between log output per capita and its linear trend in 2015. Demographics also lowered real rates, causing the ZLB to bind between 2009 and 2015, contributing to the slow recovery after the Great Recession.
Publication date: March 2018
ISBN: 9781484345405
$18.00
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Topics covered in this book

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Great Recession , Demographics , Zero Lower Bound , Forward Guidance , General , Demographic Trends and Forecasts

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