Macroeconomics in the age of secular stagnation

Abstract : The “Great Recession” that began in 2008 plunged the economy into long-lasting stagnation with high unemployment, depressed output and very low inflation. This crisis, whose exceptional duration is difficult to explain using the theoretical tools of contemporary macroeconomics, invites us to enrich fundamental analysis. Conceptualizing secular stagnation is then based on the introduction of market imperfections such as credit rationing on the financial market as well as nominal rigidities on the labour market. The resulting equilibrium is characterized by the underemployment of factors of production (high unemployment, low capital accumulation) associated with a fall in prices (deflation) and monetary policy that is inactive because of the zero lower bound constraint on the key rate. In a period of secular stagnation, the impact of economic policies is affected, and many Keynesian properties appear: a deflationary impact of supply policies, ineffective conventional monetary policy and a positive effect of public spending, although limited by the crowding out of private investment.