Lecture 2: The eschatology of lost decades Paul Krugman Growing - - PowerPoint PPT Presentation

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Lecture 2: The eschatology of lost decades Paul Krugman Growing - - PowerPoint PPT Presentation

Jan 15, 2023 293 likes •579 views

Lecture 2: The eschatology of lost decades Paul Krugman Growing surpluses 2000 2007 Developing Asia 38.6 406.5 Newly Industrialized 38.9 103.6 Middle East 71.9 254.1 Japan 119.6 211 Germany -32.6 250.3 Total 236.4 1225.5

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Lecture 2: The eschatology of lost decades

Paul Krugman

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2000 2007 Developing Asia 38.6 406.5 Newly Industrialized 38.9 103.6 Middle East 71.9 254.1 Japan 119.6 211 Germany

  • 32.6

250.3 Total 236.4 1225.5

Growing surpluses

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Lending, borrowing Future repayment Lenders Borrowers Slope = 1+r

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Lending, borrowing Future repayment Lenders Borrowers Slope = 1+r Constraint

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Employment cycles

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AD LRAS SRAS1 SRAS2 Output Price level

The textbook adjustment process

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AD AS Output Price level

But in the liquidity trap, it probably looks like this …

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So how does it end? Keynesian business cycle theory: “use, decay, and obsolescence” Koosian theory: rebuilding the balance sheets

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Use, decay, and obsolescence: US stock of autos: 135 million May 2009 auto sales: 484,000 Annual rate of 6 million? If so, more than 20 years to replace stock …

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Source: Richard Koo

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Start

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depression US entry into war

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Source: OECD