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Equilibrium Real Interest Rates and Secular Stagnation: An Empirical Analysis for Euro-Area Member Countries. CEPS Working Document No 2017/09, August 2017

Belke, Ansgar and Klose, Jens (2017) Equilibrium Real Interest Rates and Secular Stagnation: An Empirical Analysis for Euro-Area Member Countries. CEPS Working Document No 2017/09, August 2017. [Working Paper]

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    Abstract

    Is secular stagnation—a period of persistently lower growth such as that seen following the financial crisis of 2008-09—a valid concern for euro-area countries? We tackle this question using the well-established Laubach-Williams model to estimate the unobservable equilibrium real interest rate and compare it to the actual real rate. In light of the considerable increase in heterogeneity among EU member countries since the beginning of the financial crisis, we apply our approach to 12 euro-area countries to provide country-level answers to the question of secular stagnation. The presence of secular stagnation in a number of euro-area countries has important implications for ECB decision-making (e.g. voting power in the Governing Council) and EU governance. Our results indicate that secular stagnation is not a significant threat to most euro-area countries, with the possible exception of Greece.

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    Item Type: Working Paper
    Uncontrolled Keywords: equilibrium real interest rate, secular stagnation, euro-area countries, heterogeneity
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > economic and financial affairs > economic growth
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > CEPS Working Documents
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 11 Aug 2017 13:11
    Number of Pages: 28
    Last Modified: 10 Dec 2019 15:38
    URI: http://aei.pitt.edu/id/eprint/88528

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