Secular Stagnation and Macroeconomic Policy


Secular stagnation theory has developed substantially recently and offers substantial insights that policymakers have yet to fully internalize. This paper reviews the considerations that led me to revive the secular stagnation idea, summarizes the theory as I understand it today, and argues that events since I started advocating the secular stagnation view have tended to confirm its predictions and reject those of its critics. It addresses the various objections, both theoretical and empirical, that have been put forward to the secular stagnation idea, and argues that if secular stagnation is a central macroeconomic issue, much of the conventional wisdom regarding macroeconomic policy needs to be rethought. Contrary to current orthodoxy, monetary policies may be able to have lasting impacts on levels of output but not to determine rates of inflation. Fiscal policies may be essential for assuring full employment and financial stability. Increases in government indebtedness may contribute to financial stability.

This is a preview of subscription content, log in to check access.

Fig. 1

Sources: Bureau of Economic Analysis (2016), National Bureau of Economic Research (2016), Census (2016) and CBO (2016)

Fig. 2

Sources: International Monetary Fund (2011–2016), Federal Reserve (2011–2016), Bureau of Economic Analysis (2016)

Fig. 3

Source: Bloomberg

Fig. 4
Fig. 5

Sources: Bloomberg November 2, 2016

Fig. 6

Sources: Bloomberg, International Monetary Fund (2016)

Fig. 7

Sources: Kiley (2015), Laubach and Williams (2015), Curdia (2015) and Hamilton et al. (2016)

Fig. 8

Source: Alichi et al. (2016)

Fig. 9

Source: Gagnon et al. (2014)

Fig. 10

Sources: IMF; State Administration of Foreign Exchange; Haver Analytics. Reproduced from Setser (2016a, b)

Fig. 11

Source: Jordà et al. (2016)

Fig. 12

Source: International Monetary Fund (2016)

Fig. 13

Source: Bloomberg

Fig. 14

Source: Bloomberg

Fig. 15

Source: Robert Shiller (2016)

Fig. 16

Sources: Bloomberg, Congressional Budget Office

Fig. 17

Source: Greenwood et al. (2014)


  1. Abel, Andrew, N. Gregory Mankiw, Lawrence Summers, and Richard Zeckhauser. 1989. Assessing Dynamic Efficiency: Theory and Evidence. Review of Economic Studies, 1–19.

  2. Alichi, Ali, Kory Katenga, and Juan Sole. 2016. Income Polarization in the United States. IMF Working Paper.

  3. Borio, Claudio, and Piti Disyatat. 2011. Global imbalances and the financial crisis. BIS Working Papers.

  4. Bureau of Economic Analysis. 2016. National Income and Product Accounts, Table 1.1.6. November.

  5. Caballero, Ricardo, Emmanuel Farhi, and Pierre-Olivier Gourinchas. 2016. Safe Asset Scarcity and Aggregate Demand. American Economic Review, Papers and Proceedings, 513–518.

  6. Caballero, Ricardo J., Emmanuel Farhi, and Pierre-Olivier Gourinchas. 2017. The Safe Assets Shortage Conundrum. Journal of Economic Perspectives 31(3): 29–46.

    Article  Google Scholar 

  7. CBO. 2016. An Update to the Budget and Economic Outlook: 2016 to 2026.

  8. Census. 2016. U.S. Population Estimates By Age and Sex.

  9. Curdia, Vasco. 2015. Why So Slow? A Gradual Return for Interest Rates. FRBSF Economic Letter, October 12.

  10. Gagnon, Etienne, Benjamin Johannsen, and David Lopez-Salido. 2014. Understanding the New Normal: The Role of Demographics. Finance and Economics Discussion Series.

  11. Gordon, Robert J. 2015. Secular Stagnation: A Supply-Side View. American Economic Review 105(5): 54–59.

    Article  Google Scholar 

  12. Greenspan, Alan. 1999. Remarks by Chairman Alan Greenspan. February 16.

  13. Greenwood, Robin, Samuel Hansen, Joshua Rudolph, and Lawrence Summers. 2014. Government Debt Management at the Zero Lower Bound. Brooking Hutchins Center Working Paper.

  14. Hamilton, James, Ethan Harris, Jan Hatzius, and Kenneth West. 2016. “The Equilibrium Real Funds Rate: Past, Present and Future.” May.

  15. Hansen, Alvin H. 1939. Economic Progress and Declining Population Growth. American Economic Review 29(1): 1–15.

    Google Scholar 

  16. IMF. 2014. Perspectives on Global Real Interest Rates. World Economic Outlook, April.

  17. International Monetary Fund. 2011–2016. World Economic Outlook Databases. Washington, DC, April.

  18. Jordà, Òscar, Moritz Schularick, and Alan M Taylor. 2016. Jordà-Schularick-Taylor Macrohistory Database.

  19. Kiley, Michael. 2015. What Can the Data Tell Us About the Equilibrium Interest Rate. Finance and Economics Discussion Series.

  20. Kydland, Finn E., and Edward C. Prescott. 1977. Rules Rather than Discretion: The Inconsistency of Optimal Plans. Journal of Political Economy 85(3): 473–491.

    Article  Google Scholar 

  21. Laubach, Thomas, and John C Williams. 2015. Measuring the Natural Rate of Interest—Redux. November.

  22. National Bureau of Economic Research. 2016. US Business Cycle Expansions and Contractions.

  23. Philadelphia Federal Reserve. 2013, 2016. Survey of Professional Forecasters. Q4.

  24. Rachel, Lukasz, and Thomas D. Smith. 2015. Secular drivers of the global real interest rate. Bank of England Staff Working Paper No. 571.

  25. Rogoff, Kenneth. 1985. The Optimal Degree of Commitment to an Intermediate Monetary Target. The Quarterly Journal of Economics 100(4): 1169–1189.

    Article  Google Scholar 

  26. Setser, Brad. 2016a. Asia’s Persistent Savings Glut. October 25.

  27. Setser, Brad W. 2016b. Asia’s Persistent Savings Glut. October 25.

  28. Shiller, Robert. 2016. U.S. Stock Markets 1871Present and CAPE Ratio.

  29. Summers, Lawrence H. 2013. IMF Fourteenth Annual Research Conference in Honor of Stanley Fischer. Washington, DC, November 8.

  30. Summers, Lawrence H. 2015. Have we Entered an Age of Secular Stagnation? IMF Fourteenth Annual Research Conference in Honor of Stanley Fischer, Washington, DC. IMF Economic Review 63(1): 277–280.

    Article  Google Scholar 

Download references

Author information



Corresponding author

Correspondence to Lawrence H. Summers.

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Summers, L.H. Secular Stagnation and Macroeconomic Policy. IMF Econ Rev 66, 226–250 (2018).

Download citation

JEL Classification

  • E22
  • E32
  • E60
  • E62
  • E63