%0 Unpublished work %T Capital Accumulation and the Dynamics of secular stagnation %+ Observatoire français des conjonctures économiques (Sciences Po) (OFCE) %A Le Garrec, Gilles %A Touzé, Vincent %8 2016-06-01 %D 2016 %K Secular stagnation %K Capital accumulation %K Zero lower Bound %Z Humanities and Social Sciences/Economics and FinancePreprints, Working Papers, ... %X We characterize the dynamics of secular stagnation as a permanent regimeswitching from a full employment equilibrium to an underemployment equilibrium.In the latter, the natural interest rate is negative, and the economy is in deáation.Due to the non negativity condition imposed on policy rate, the zero lower bond(ZLB) applies which prevents targeting ináation. The secular stagnation equilibriumis achieved in a standard overlapping generations model with capital accumulationwhere two market imperfections are introduced: credit rationing and downwardnominal wage rigidity. To Ögure out how to escape the secular stagnation trap, westudy the impact of various macroeconomic policies. Raising the ináation target isonly e§ective if the central bank has enough credibility. By supporting aggregatedemand, Öscal policy can help the economy get out of the secular stagnation trap.However, this policy reduces the incentive to accumulate capital: there is a trade-o§between exiting secular stagnation and depressing potential GDP. Dynamic multi-pliers are upper than one unless the Öscal stimilus is too strong. We also shed lighton an asymmetry in the dynamics: recovery takes longer than falling into recession. %G English %2 https://sciencespo.hal.science/hal-03459297/document %2 https://sciencespo.hal.science/hal-03459297/file/2016-le-garrec-touze-capital-accumulation-and-the-dynamics-of-secular-stagnation.pdf %L hal-03459297 %U https://sciencespo.hal.science/hal-03459297 %~ SHS %~ SCIENCESPO %~ AO-ECONOMIE %~ USPC %~ OFCE %~ SCPO_OA %~ SCPO-REPEC