Template-Type: ReDIF-Paper 1.0
Author-Name: Sanjay R. Singh
Author-Name-First: Sanjay R.
Author-Name-Last: Singh
Author-Name: Pablo Cuba-Borda
Author-Name-First: Pablo
Author-Name-Last: Cuba-Borda
Author-Workplace-Name: Department of Economics, University of California Davis
Title: Understanding Persistent Stagnation
Abstract: We theoretically explore long-run stagnation at the zero lower bound in a representative agent framework. We analytically compare expectations-driven stagnation to a secular stagnation episode and find contrasting policy implications for changes in government spending, supply shocks and neo-Fisherian policies. On the other hand, a minimum wage policy is expansionary and robust to the source of stagnation. Using Bayesian methods, we estimate a DSGE model that can accommodate two competing hypotheses of long-run stagnation in Japan. We document that equilibrium selection under indeterminacy matters in accounting for model fit.
Length: 50
File-URL: https://repec.dss.ucdavis.edu/files/SKCcCsGGdfCBodCGNZYmWFw2/Draft_EFStag_CS.pdf
File-Format: application/pdf
Number: 329
Classification-JEL: E31, E32, E52
KeyWords: Expectations-driven trap, secular stagnation, inflation expectations, zero lower bound.
Creation-Date: 20190201
Handle: RePEc:cda:wpaper:329