21st Century Macro / Narayana R. Kocherlakota.

Format:

Book

Author/Creator:

Kocherlakota, Narayana R.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26791.

NBER working paper series no. w26791

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

In the 21st century, many key macroeconomic variables in the developed world have been persistently low, including inflation, output, growth, interest rates (both real and nominal), and labor share. I consider a class of standard representative agent rational expectations models in which fundamentals are deterministic and constant over time. I show that for any level of nominal frictions (no matter how small) and for any monetary policy rule (regardless of how active), there is a large set of stochastic equilibria that exhibit permanently low inflation, low output, low labor share, and low nominal interest rates. If the Phillips curve is sufficiently flat, then these equilibria also exhibit low growth and real interest rates.

Notes:

Print version record

February 2020.