Secular stagnation
Topic: Economic Growth Theories and Business Cycles · NCERT: Beyond NCERT
Meaning
Secular stagnation is a long period of low growth, low interest rates and weak demand. "Secular" here means long-lasting, not a passing phase. People want to save more than firms want to invest, even when interest rates are close to zero. Alvin Hansen coined the idea in 1938, and Lawrence Summers revived it in 2013. It is linked to a low r*, the neutral real interest rate at which the economy neither speeds up nor slows down.
Example
Japan's "lost decades" after 1990 are the classic case. Growth stayed weak for years, even though interest rates were very low.
Don't confuse with
- Recession: a recession is a temporary downturn within a business cycle. Secular stagnation is a slow-growth state that lasts for many years.