Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2018-03-30
Revision-Date: 2018-10-28
Number: 18-032/VI
Author-Name: Sweder van Wijnbergen
Author-Email: s.j.g.vanwijnbergen@uva.nl
Author-Workplace-Name: UvA, CEPR
Title: Real interest rates, exchange rates and the ZLB: on Secular Stagnation
Abstract: What are the drivers of low real rates? What are the implications of the Zero Lower Bound for economic policy? To discuss these questions we introduce a full general equilibrium model of the world economy within a simple (2 period) intertemporal structure. The model is simple enough to allow for full analytical solution yet sufficiently complex to allow us to address the impact of anticipated future productivity slow down, aging, structural reform and fiscal policy on real interest rates if markets clear and on aggregate economic activity if they do not (because of the ZLB). We extend both the equilibrium model and the ZLB variant to a more-goods-per-period structure to address (real) exchange rate policy and the macroeconomic impact of trade tariffs, like Trump's current trade war, on global economic activity.
Classification-JEL: E62; F13; F40; F41; H30
Keywords: equilibrium real interest rates; aging; productivity change; the ZLB; real exchange rates; import tariffs
File-URL: https://papers.tinbergen.nl/18032.pdf
File-Format: application/pdf
File-Size: 635680 bytes
Handle: RePEc:tin:wpaper:20180032