Research on Secular Stagnation in Richer Countries via Multiple Linear Regression

Abstract

Many richer countries had been entered into a phase where they experienced severe slowdown in economic growth. Such a phenomenon has led researchers to think if the theory of secular stagnation, proposed by Alvin Hansen (1942) and reemphasized by Larry Summers (2010), was gradually becoming the reality. Researchers have been investigating the real world to check if the idea of secular stagnation is reasonable, while some proponents have started to explore the inner reason of it. This paper adopts the most popular and useful multiple linear regression model to analyze the Penn World Table data, trying to further explore the secular stagnation in current richer countries. Results shows that the combination of welfare-relevant productivity, labor compensation, exchange rate, human capital index, internal rate of return, and interaction between welfare-relevant productivity and human capital index has the strongest relationship with the slowdown/growth. The results manage to present insights for policy makers when negotiating, to help these countries boost their economic growth.