The role of inequality in explaining the secular stagnation hypothesis

This paper focuses on one of the factors that have been put forward in the literature within the secular stagnation view: Rising inequality. In a two-step procedure, this research first applies the Laubach and Williams (2003) methodology to jointly estimate the natural rate of interest (NRI), potent...

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Bibliographic Details
Main Author: Soares, Mariana Nunes da Fonseca Pereira (author)
Format: masterThesis
Language:eng
Published: 2019
Subjects:
Kalman filter
Secular stagnation
Natural interest rate
Wealth inequality
Domínio/Área Científica::Ciências Sociais::Economia e Gestão
Online Access:http://hdl.handle.net/10362/32559
Country:Portugal
Oai:oai:run.unl.pt:10362/32559
Description
Summary:This paper focuses on one of the factors that have been put forward in the literature within the secular stagnation view: Rising inequality. In a two-step procedure, this research first applies the Laubach and Williams (2003) methodology to jointly estimate the natural rate of interest (NRI), potential output and its growth rate for the G7 and we find that the NRI has been decreasing in all countries, which is in accordance with the secular stagnation hypothesis. In a second step, a fixed effects regression for a panel of 7 countries is used to estimate the effect of inequality on the natural rate of interest from 1980 to 2016. We find evidence that rising inequality has contributed to the decline of the time-varying natural rate of interest.

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