Economic policy in a environment of secular stagnation

Abstract

Secular stagnation has become one of the main economic issues over the last years. It seemed forgotten until 2013, when Summers revived it due to the weak recovery experienced after the Global Financial Crisis. This is probably, consequence of some structural factors that are changing the global economic pattern. A global increase in the propensity to save (global saving glut) and a decrease in the propensity to invest have led to a declining trend of real rates. Besides, episodes of financial instability and ZLB are likely to be more common in the future while monetary policy efficacy is constraint by these almost zero rates. This is why a discussion about the adequate economic policies to be implemented has arisen among different economists, who agree that the conventional tools have become obsolete in this new possible environment of secular stagnation.