The degree of “great” in “Great Stagnation” is a choice variable
SAO PAOLO | By Marcus Nunes via Historinhas | Scott Sumner writes “What kind of Great Stagnation?” It seems to me that the Krugman/Summers view has three big problems: The standard textbook model says demand shocks have cyclical effects, and that after wages and prices adjust the economy self-corrects back to the natural rate after a few years. Even if it takes 10 years, it would not explain the longer-term stagnation that they believe is occurring.