BoJ paper builds model of secular stagnation
Authors recommend scrapping the single representative household
Researchers may have been approaching the modelling of secular stagnation wrong, according to a discussion paper published today (July 28) by the Bank of Japan (BoJ).
Authors Gauti Eggertsson and Neil Mehrotra redesign an overlapping generations New Keynesian model in their paper, A model of secular stagnation. Their innovation is to substitute the single representative household of standard models for one that is able to vary its borrowing choices dynamically over the course of a lifecycle.
The
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