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The Negative Natural Rate of Interest in the Modern Theories of Liquidity Trap and Secular Stagnation: Back to Böhm-Bawerk via Samuelson

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  • Stefano Di Bucchianico

Abstract

The negative natural rate of interest is since two decades eliciting theoretical and policy debates. It re-emerged, after a relatively long time, in Krugman’s Liquidity Trap model. Later, it was placed at the hearth of the Secular Stagnation theory by Summers. It is argued that Krugman’s negative natural rate of interest ensues from theoretical premises analogous to those present in Samuelson’s overlapping-generations model. In turn, Samuelson obtained a negative equilibrium interest rate by opportunely recasting Böhm-Bawerk’s three causes for a positive rate of interest. The present paper illustrates and analyses this neglected line of thought, until its recent developments.

Suggested Citation

  • Stefano Di Bucchianico, 2021. "The Negative Natural Rate of Interest in the Modern Theories of Liquidity Trap and Secular Stagnation: Back to Böhm-Bawerk via Samuelson," STOREPapers 1_2021, Associazione Italiana per la Storia dell'Economia Politica - StorEP.
    • Handle: RePEc:hpo:wpaper:1_2021
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    JEL classification:

    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • B30 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - General

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