What is secular stagnation in simple terms?

Too little spending and investment keeps growth weak even when interest rates are very low.

What remedies are discussed?

Fiscal expansion, higher inflation targets and public investment, each debated.

Secular Stagnation

📈 Economics By CampusDown Wiki Editorial Team Last updated October 27, 2026

Secular stagnation is the theory that desired saving persistently exceeds desired investment, pushing the real interest rate needed for full employment very low or negative, so economies remain stuck with weak growth and demand for long periods. Alvin Hansen proposed it in the 1930s and Lawrence Summers revived it after 2013.

Contents

1. Hansen's idea
2. Summers's revival
3. Alternative views
4. FAQ
5. References

Hansen's idea

Hansen (1939) warned slowing population growth and fewer investment outlets could cause chronic unemployment; the postwar boom eclipsed the warning.

Summers's revival

Summers (2014) used the idea to explain the slow recovery after 2008, combining a liquidity trap with hysteresis. Eggertsson and colleagues (2019) modelled it and Rachel and Summers (2019) documented falling neutral rates.

Alternative views

Gordon (2015) stressed supply-side slowdown, Mian and colleagues (2021) proposed indebted demand, and post-2021 inflation reopened the debate.

FAQ

What is secular stagnation in simple terms?: Too little spending and investment keeps growth weak even when interest rates are very low.
What remedies are discussed?: Fiscal expansion, higher inflation targets and public investment, each debated.

Sources reviewed: 2026-10-26

References

Hansen, A. H. (1939). Economic progress and declining population growth. American Economic Review, 29(1), 1–15. The address that coined the term.
Summers, L. H. (2014). U.S. economic prospects: Secular stagnation, hysteresis, and the zero lower bound. Business Economics, 49(2), 65–73. Revived the idea after 2008.
Gordon, R. J. (2015). Secular stagnation: A supply-side view. American Economic Review, 105(5), 54–59. A supply-side interpretation.
Eggertsson, G. B., Mehrotra, N. R., & Robbins, J. A. (2019). A model of secular stagnation: Theory and quantitative evaluation. American Economic Journal: Macroeconomics, 11(1), 1–48. A formal model.
Rachel, Ł., & Summers, L. H. (2019). On secular stagnation in the industrialized world. Brookings Papers on Economic Activity, 2019(1), 1–76. Evidence on falling neutral rates.
Mian, A., Straub, L., & Sufi, A. (2021). Indebted demand. Quarterly Journal of Economics, 136(4), 2243–2307. Debt and inequality depress demand.
Teulings, C., & Baldwin, R. (Eds.). (2014). Secular stagnation: Facts, causes and cures. CEPR Press. An edited volume of views.

Reports and materials that use this theory (Korean)

There are no materials dedicated to this theory yet, but you can search related reports in the CampusDown library (Korean).

Find more reports · Search '장기정체론' on CampusDown →

Liquidity trapWhat a liquidity trap is, its basis in Keynes’ liquidity preference theory, why monetary policy loses traction near zero interest rates, Japan and post-2008 examples, and responses such as fiscal policy, QE and forward guidance.📈 Economics Hysteresis in EconomicsWhat hysteresis in economics is: temporary shocks leave lasting marks on unemployment or output. Covers Blanchard and Summers on European unemployment, the natural rate hypothesis, trade and entry-exit hysteresis, and evidence after the Great Recession.📈 Economics DeflationWhat deflation is, how it differs from disinflation, causes, why it is dangerous (delayed spending, Fisher’s debt deflation, zero lower bound), Japan’s experience and policy responses.📈 Economics Financial Instability HypothesisWhat the financial instability hypothesis is: Minsky's theory that stability encourages risk-taking and debt until crisis, hedge, speculative and Ponzi finance, the Minsky moment, debt deflation and lessons from 2008.📈 Economics

Latest ArticlesView all ›

New guides for college study and assignments (Korean)

This article was last updated on October 27, 2026. It is based on widely recognized original works and textbooks; when citing it in a paper, please check the original sources listed in the references.