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Secular Stagnation, Not Secular Stagflation

Even if secular stagnation is our destiny, it is not likely to take the form of secular stagflation, or what Nouriel Roubini calls the “Great Stagflation” 

There are two distinct drivers of stagflation, both of which can be operative simultaneously.

The first occurs when a negative aggregate supply shock

The second type of stagflation occurs when inflation is too high and the central bank uses restrictive monetary policy to bring it down. Monetary-policy changes are known to affect underlying inflation with long, variable, and uncertain lags, whereas real (inflation-adjusted) GDP and unemployment tend to respond more swiftly.

Willem H. Buiter Project Syndicate 6 January 2023


From Great Moderation to Great Stagflation

Nouriel Roubini Project Syndicate 9 August 2022


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