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Еconomic Policy Under Global Flight to Safe Assets and Effective Lower Bound: the Bulgarian Prospects

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  • Ivan Todorov

    (University of National and World Economy, Sofia, Bulgaria)

Abstract

The study is motivated by the (global) trend of excess savings and the restrictive response to investment in productive capital despite abundant financing. While there is heterogeneity among countries, in Bulgaria we can observe both declining market interest rates (rm) and long-standing investment stagnation in terms of gross capital formation as a share of GDP. This stylized fact can be described and explained through the NeoWicksellian concept of the natural interest rate (r*), with potentially secular low values of r* posing serious challenges to further stimulating interest-sensitive aggregate expenditures. In contrast to other studies, a trend towards a decrease in the natural interest rate is observed for Bulgaria, which provides a more accurate explanation for the structural factors, including underutilized fiscal space (with r*

Suggested Citation

  • Ivan Todorov, 2025. "Еconomic Policy Under Global Flight to Safe Assets and Effective Lower Bound: the Bulgarian Prospects," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 4, pages 1200-1218, Desember.
    • Handle: RePEc:nwe:eajour:y:2025:i:4:p:1200-1218
    as

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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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