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Money and Secular Stagnation

In: Trailblazing Visions of Money in Economic Theory

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  • Biagio Bossone

Abstract

This chapter reconsiders the root causes concept of secular stagnation, an idea that regained prominence following the 2008–09 financial crisis. It highlights how a strong preference for liquid assets over illiquid ones, fueled by persistent pessimism among economic agents, can entrap economies in stagnation. Utilizing the micro-founded model based on utility theory illustrated in Chap. 3 , Secular Stagnation is shown to emerge from money and other asset stock dynamics ultimately driven by liquidity preference (in Keynes’s tradition), rather than by investment-saving relations. The chapter discusses various demand-side policy strategies, including quantitative easing, negative interest rates, and “helicopter money,” arguing that unconventional methods can better stimulate aggregate demand in the face of entrenched liquidity preferences. It emphasizes the importance of expectations and suggests that even slight increases in optimism can shift liquidity preferences and spur recovery. Ultimately, this work advocates for bold fiscal actions and integrated monetary policies to address the structural challenges of advanced economies and foster sustainable growth.

Suggested Citation

  • Biagio Bossone, 2025. "Money and Secular Stagnation," Contributions to Economics, in: Trailblazing Visions of Money in Economic Theory, chapter 0, pages 287-318, Springer.
    • Handle: RePEc:spr:conchp:978-3-031-82544-6_12
    DOI: 10.1007/978-3-031-82544-6_12
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