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Corresponding Author:
Dimitris Kirikos, Hellenic Mediterranean University, Department of Accounting and Finance, Heraklion, Greece and Hellenic Open University, Greece

Secular Stagnation: Is it in the Data?

Volume 70 - Issue 4, October 2017
(pp. 411-418)
JEL classification: E30, E32
Keywords: Secular Stagnation, Switching Regimes, Long-Run Growth

Abstract

The anemic recovery of advanced economies, after eight years into the great recession, has recently been attributed to the persistent slump in demand and its effects on long-run growth rates through hysteresis effects.  If adverse secular trends are at work, then the data should show that the long-run growth rate has shifted to a lower level.  Hence, using a simple Markov switching regimes model, we investigate whether the growth rate of potential GDP has exhibited a persistent switch, based on OECD data for nine economies over the period 1990-2017.  It turns out that, in all cases, potential GDP growth is characterized by switching dynamics and this provides necessary evidence that secular stagnation cannot be ruled out empirically.


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Bibliography

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