There have been wide-ranging interpretations and views on secular stagnation. In light of the discussions over slow post-financial crisis recoveries, I would like to raise three policy issues. The first issue is to what extent central banks should consider the impact on the supply side of the economy in conducting monetary policy.
As a backdrop of the slow recoveries following the global financial crisis, it has been pointed out that the interaction between demand and supply has gained importance. That is, the weakness in demand impairs the supply side mainly by discouraging workers from participating in the labor market and dampening firms’ investment in capital stock and in research and development.