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Secular Stagnation: Insights from a New Keynesian Model with Hysteresis Effects

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  • Bas van Aarle
  • Bas Van Aarle

Abstract

To analyse the most important aspects of the Secular Stagnation hypothesis, this paper considers the effects of hysteresis in potential output in a New-Keynesian model that is extended with endogenous potential output. To do so, a number of simulations of relevant scenarios is undertaken. It is demonstrated that extending the New-Keynesian model with hysteresis has a number of crucial implications for macro-economic adjustment and macro-economic management. It is indicated how the model can contribute to a better understanding of a number of important elements of the Secular Stagnation hypothesis.

Suggested Citation

  • Bas van Aarle & Bas Van Aarle, 2016. "Secular Stagnation: Insights from a New Keynesian Model with Hysteresis Effects," CESifo Working Paper Series 5797, CESifo.
    • Handle: RePEc:ces:ceswps:_5797
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    Cited by:

    1. Tomasz Chmielewski & Mariusz Kapuściński & Andrzej Kocięcki & Tomasz Łyziak & Jan Przystupa & Ewa Stanisławska & Ewa Wróbel, 2018. "Monetary transmission mechanism in Poland. What do we know in 2017?," NBP Working Papers 286, Narodowy Bank Polski.
    2. Belke Ansgar, 2018. "Secular Stagnation, Unemployment Hysteresis and Monetary Policy in EMU: Scratches but Not Scars?," The Economists' Voice, De Gruyter, vol. 15(1), pages 1-14, December.
    3. Atanas Pekanov, 2018. "The New View on Fiscal Policy and its Implications for the European Monetary Union," WIFO Working Papers 562, WIFO.

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    More about this item

    Keywords

    potential output hysteresis; monetary policy; fiscal policy;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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