Will Europe Fall into a Japanese-Style Stagnation Trap?

Peter Harrold

No 10, CASE Network E-briefs from CASE-Center for Social and Economic Research

Abstract: Can Europe avoid falling in to a Japanese-style stagnation trap? In this type of trap, we see a repeated cycle of a financial crisis leading to a fiscal crisis, leading to a decline in consumer and investor confidence, and a resulting fall in demand. The decline in growth that inevitably follows simply causes the cycle to repeat itself. In theory, this should lead to improved competitiveness, but in Japan the forces of decline outweighed any boost in export demand.

Keywords: Japan; stagnation trap; economic crisis (search for similar items in EconPapers)
Pages: 6 Pages
Date: 2012-04
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