Growth Prospects for Advanced and Emerging Market Economies

This paper examines the reasons for the slow growth in the advanced countries since the recent global financial crisis, the slowdown in growth or recession in emerging market economies, the danger that the world may be drifting toward a new global financial crisis, and that it may face even secular stagnation. The paper concludes that growth is likely to remain slow for the rest of this decade in advanced countries and to continue to decline in emerging market economies. It also examines the danger that with interest rates at the zero-bound level in advanced nations, a new financial bubble may be in the making as investors, in search of returns, undertake excessively risky investments, and that this may lead to a new global financial crisis. It is not certain, however, that the world is facing secular stagnation and, if so, that a new massive fiscal stimulus (as advocated but some) would prevent it or correct it.