Debunking the Myth: Global Stagnation Hypothesis Invalidated by New Research
The "Secular Stagnation Hypothesis" by Lawrence H. Summers suggests that low interest rates and weak investment are causing economic stagnation. However, a new study shows that this hypothesis is flawed. By analyzing savings, investment, and interest rates, researchers found that the natural interest rate did not drop to zero after the financial crisis, as claimed by Summers. In fact, it has remained consistently higher than the federal funds rate. This challenges Summers's theory and supports the Austrian business cycle theory as a better explanation for the global financial crisis and its aftermath.