Secular stagnation, debt overhang and other rationales for sluggish growth, six years on

BIS Working Papers No 482
January 2015

There is considerable controversy over why sluggish economic growth persists across many advanced economies six years after the onset of the financial crisis. Theories include a secular deficiency in aggregate demand, slowing innovation, adverse demographics, lingering policy uncertainty, post-crisis political fractionalisation, debt overhang, insufficient fiscal stimulus, excessive financial regulation, and some mix of all of the above. This paper surveys the alternative viewpoints. We argue that until significant pockets of private, external and public debt overhang further abate, the potential role of other headwinds to economic growth will be difficult to quantify.

JEL classification: E32, E62

Keywords: secular stagnation, debt overhang, deleveraging