Wren-Lewis, S. (2015) “We already have a simple and conventional story to explain the weak recovery“, VoxEU Organisation, 30 Ιανουαρίου.
The anaemic recovery from the Global Crisis and the downward trend in real interest rates since 1980 have revived interest in the idea of secular stagnation. This column argues that if the US, UK, and Eurozone had not pursued contractionary fiscal policies from 2010 onwards, the recovery would not have been so slow and nominal interest rates would no longer be at the zero lower bound. Expanding the stock of government debt would have ameliorated, not worsened, the shortage of safe assets.
Coen Teulings and Richard Baldwin start their introduction to VoxEU’s eBook on secular stagnation (Teulings and Baldwin 2014) with the following two sentences:
“Six years after the Crisis and the recovery is still anaemic despite years of zero interest rates. Is ‘secular stagnation’ to blame?”
I think those two sentences embody a confusion that seems to arise when secular stagnation is discussed. For some (Eichengreen 2014) secular stagnation is about a downward tendency of real interest rates since 1980, but for others it seems to be about why recovery from recession has been weak. However I would argue that we know why the recovery has been so slow. It involves just two words: fiscal policy.
As IMF economists Kose et al. (2013) write, “The current and projected paths of government expenditures in the advanced economies are quite different than during past recoveries. During the past recoveries, fiscal policy was decisively expansionary, with increases in real primary government expenditures. This time is different.”
To illustrate the force of this point, I did the following back-of-the-envelope calculation. Suppose real spending on government consumption and investment (hereafter G) had grown by 2% per annum in 2010, and in each of the following years up until 2013, in the US, UK, and Eurozone. This would seem to be close to a neutral path for government spending. (Growth in G in the US – which includes expenditure at the state level – was a little above trend in 2008 and 2009 at around 3%, compared to an average of about 2.3% growth over the previous decade.)
Σχετικές αναρτήσεις:
- Guntram, Wolf: “How Can Europe Avoid Secular Stagnation?” στο Growth, Convergence and Income Distribution: The Road from the Brisbane G-20 Summit, σσ. 77-80, Think Tank 20: Νοέμβριος 2014.
- Summers, L. (2014) “Reflections on the new ‘Secular Stagnation hypothesis’“, VoxEU Organisation, 30 Οκτωβρίου.
- Hugh, E. (2014) “Does The Secular Stagnation Theory Have Any Sort of Validity?“, A Fistful of Euros: European Opinion Blog, 20 Οκτωβρίου.