Jason Lu, Coen Teulings, 21 October 2016

The decline in real interest rates over the past several decades has been the subject of intense policy debate. This column argues that, with the current demographic profile of large older cohorts leading to a population that is disproportionately biased towards saving, we can expect real interest rates to remain low or negative for another 10 to 15 years. The only way for the Eurozone, in particular, to accommodate these excess savings may be to raise its sovereign debt levels.

Julian Kozlowski, Laura Veldkamp, Venky Venkateswaran, 11 September 2016

The Great Recession has had long-lasting effects on credit markets, employment, and output. This column combines a model with macroeconomic data to measure how the recession has changed beliefs about the possibility of future crises. According to the model, the estimated change in sentiment correlates with economic activity. A short-lived financial crisis can trigger long-lived shifts in expectations, which in turn can trigger secular stagnation.

Roger Farmer, Konstantin Platonov, 02 September 2016

The concept of 'secular stagnation' asserts that unemployment remains high and output below potential because investors are pessimistic. This column presents a way to rethink the IS-LM model to include investor expectations. This 'IS-LM-NAC' model explains the slow recovery from the Great Recession, provides a theory-consistent explanation for secular stagnation, and suggests policy options to escape it.

Gauti Eggertsson, Lawrence Summers, 22 July 2016

The secular stagnation hypothesis suggests that low interest rates may be the new normal in years to come. This column argues that this prospect should not only lead to a major rethinking of policy from the perspective of individual economies, but also a major rethinking about monetary and fiscal policy in the international context, the role of international capital flows, and the role of policy coordination across borders. In times of secular stagnation, events such as Brexit or the recent turbulence in Turkey have much larger spillover effects than under normal circumstances.


The objective of this course is to present empirical applications (as well as the research methodologies) of relevant questions for both banking theory and policy, mainly related to Systemic Risk, Crises, Monetary Policy and Risk taking behaviour. An important objective is to understand scientific papers in empirical banking; to accomplish this objective, emphasis is placed on illustrating research methodologies used in empirical banking and learning the application of these methodologies to selected topics, such as:

- Securities and credit registers; large datasets

- Fire sales, runs, market and funding liquidity, systemic risk

- Risk-taking and credit channels of monetary policy

- Moral hazard vs. behavioral based risk-taking

- Secular stagnation, banking and debt crises

- Interbank globalization, contagion, emerging markets, policy

Ricardo Caballero, Emmanuel Farhi, 11 August 2014

The secular decline in real interest rates over the last two decades indicates a growing shortage of safe assets – a shortage that became acute during the Global Crisis. Given the still-depressed levels of real rates and the sluggish investment recovery, this chapter conjectures that the shortage of safe assets will remain a structural drag on the economy, undermining financial stability and straining monetary policy during contractions. Under these conditions, an additional important aspect of public infrastructure investment is the government’s ability to issue safe debt against such projects.

Richard Koo, 11 August 2014

The Great Recession is often compared to Japan’s stagnation since 1990 and the Great Depression of the 1930s. This chapter argues that the key feature of these episodes is the bursting of a debt-financed asset bubble, and that such ‘balance sheet recessions’ take a long time to recover from. There is no need to suffer secular stagnation if the government offsets private sector deleveraging with fiscal stimulus. However, until the general public understands the fallacy of composition, democracies will struggle to implement such policies during balance sheet recessions.

Joel Mokyr, 11 August 2014

In the aftermath of the Great Recession, many economists are persuaded that slow growth is here to stay. This chapter argues that technological progress – particularly in areas such as computing, materials, and genetic engineering – will prove the pessimists wrong. The indirect effects of science on productivity through the tools it provides scientific research may dwarf the direct effects in the long run. Although technological advances may polarise labour markets, they also bring widespread benefits that are not accurately reflected in aggregate statistics.

Nicholas Crafts, 11 August 2014

After the Great Depression, secular stagnation turned out to be a figment of economists’ imaginations. This chapter argues that it is still too soon to tell if this will also be the case after the Great Recession. However, the risks of secular stagnation are much greater in depressed Eurozone economies than in the US, due to less favourable demographics, lower productivity growth, the burden of fiscal consolidation, and the ECB’s strict focus on low inflation.

Edward Glaeser, 11 August 2014

The wonders of the internet age cast doubt on the idea that technological progress is stagnating. Worryingly, however, some fraction of US job losses has become permanent after almost every recession since 1970. This chapter argues that persistent joblessness is unlikely to be a purely macroeconomic phenomenon. Although the US welfare system remains less generous than many European ones, it has become substantially more generous over time. Alongside targeted investments in education and training, radical structural reforms to America’s safety net are needed to ensure it does less to discourage employment.

Gerben Bakker, Nicholas Crafts, Pieter Woltjer, 05 February 2016

The Great Depression is considered one of the darkest times for the US economy, but some argue that the US economy experienced strong productivity growth over the period. This column reassesses this performance using improved measures of total factor productivity that allow for comparisons of productivity growth in the Depression era and in later decades. Contrary to Alvin Hansen’s gloomy prognosis of secular stagnation, the US economy was in a very strong position during the 1930s by today’s standards.

Richard Baldwin, 25 December 2015

Team Vox wishes to thanks all its readers and contributors for making 2015 a great year for the site. Vox will post no new columns between 25 December 2015 and 2 January 2016. There is, however, plenty to catch up on. This column presents a list of topical columns written by leading economists in 2015. It also presents a few statistics on Vox’s popularity.

Nemat Shafik, 25 June 2015

UK long-term yields are extraordinarily low. This could be interpreted as financial markets expecting prolonged low growth or low inflation, or both. This column argues that this view is overly gloomy. Factors pulling down today’s inflation are unlikely to be permanent, and the economic headwinds should ease gradually. Additionally, a return to productivity growth should facilitate faster potential output growth over the long term. A more likely interpretation is that low yields reflect precautionary actions by public and private financial-market participants to reduce vulnerabilities to adverse outcomes.

Willem Buiter, Ebrahim Rahbari, Joe Seydl, 05 June 2015

Stagnation is gripping several of the world’s largest economies and many view this as secular, not transient. This column argues that many economies need both demand-side stimulus and supply-side reform to close the output gap and restore potential-output growth. A combined monetary-fiscal stimulus – i.e. helicopter money – is needed to close the output gap, and this should be accompanied with extensive debt restructuring, policies to halt rising inequality, and additional public infrastructure investment.

Roger Backhouse, Mauro Boianovsky, 19 May 2015

The notion of secular stagnation – a state of negligible or zero economic growth – is back in the headlines. Questions naturally arise about its intellectual antecedents. This column discusses how the concept rose and fell with the economic fortunes of advanced industrialised nations. Political trends and trends in economic theory played a part in its trajectory, with the notion closely connected to the idea that the level of government debt should be allowed to rise.

Robert Hall, 22 April 2015

The disappointing post-Crisis performance of the US economy and even more disappointing performance of continental Europe and Japan have revived interest in the possibility of secular stagnation. This column argues that a consensus is forming that inadequate demand will no longer be a factor in whatever US stagnation occurs in coming years. In Japan and Europe, on the other hand, the case for boosting demand is strong and inadequate demand is almost surely a main cause of the stagnation. 

Kenneth Rogoff, 22 April 2015

Weak, post-Crisis growth has been blamed on secular stagnation. This column argues that the debt super-cycle view provides a more accurate and useful framework for understanding what has transpired and what is likely to come next. The difference matters. Unlike secular stagnation, a debt super-cycle is not forever. After deleveraging and borrowing headwinds subside, expected growth trends might prove higher than simple extrapolations of recent performance might suggest.

Juan Antolin-Diaz, Thomas Drechsel, Ivan Petrella, 17 February 2015

Evidence of a decline in long-run growth is accumulating. However, many important questions remain unanswered. The analysis in column employs recent econometric techniques to provide an answer to some of the pertinent questions. The findings indicate that the weakness of the current recovery in the G7 is associated with a decline in the long-run growth rate of labour productivity.

Simon Wren-Lewis, 30 January 2015

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.

Paul De Grauwe, 30 January 2015

Nowhere in the developed world is secular stagnation more visible than in the Eurozone. This column explains this phenomenon with asymmetric external balances within the Eurozone. Southern countries had accumulated current-account deficits and became debtors when the Crisis hit, whereas the northern ones became creditors. The burden of the adjustments has been borne almost exclusively by the debtor countries creating a deflationary bias. Suggested fiscal policy prescriptions are government investment programmes, to be implemented by northern countries (and in particular, Germany).