Must-Read: : A Contagious Malady? Open Economy Dimensions of Secular Stagnation: “We consider an overlapping generations, open economy model of secular stagnation…
…and examine the effect of capital flows on the transmission of stagnation. In a world with a low natural rate of interest, greater capital integration transmits recessions across countries…. In a global secular stagnation, expansionary fiscal policy carries positive spillovers implying gains from coordination, and fiscal policy is self-financing. Expansionary monetary policy, by contrast, is beggar-thy-neighbor…. Competitiveness policies, including structural labor market reforms or neomercantilist trade policies, are also beggar-thy-neighbor in a global secular stagnation…