What Is Stagnation?

Stagnation is a prolonged period of little or no growth in an economy often highlighted by periods of high unemployment. A rate of growth of less than 2-3% annually as measured by gross domestic product (GDP) is considered stagnation.

Stagnation can occur on a macroeconomic scale or in specific industries or companies. Stagnation may be either a temporary condition, such as a 澳洲幸运5官方开奖结果体彩网:growth recession, temporary economic shock, or pa𝐆rt of an economꦺy's long-term structural condition.

Understanding Stagnation

Stagnation occurs within an economy when total output is either declining, flat, or growing slowly. Persistent unemployment, flat job growth, no wage increases, and an absence of stock market booms or highs are evidence of stagnation. As economies cycle through periods of 澳洲幸运5官方开奖结果体彩网:recession to growꩵth or from growth to recession, they may experience a time of stagnation.

Cyclical Stagnation

Stagnation can occur as a temporary condition in the course of an 澳洲幸运5官方开奖结果体彩网:economic cycle or 澳洲幸运5官方开奖结果体彩网:business cycle as a recession is ending and recovery is beginning. During these periods, both 澳洲幸运5官方开奖结果体彩网:monetary policies and 澳洲幸运5官方开奖结果体彩网:fiscal policies may be implemented to avoid p𒈔rolonged stagnation.🦋

Economic Shocks

Specific events or economic shocks ꧃can induce periods of stagnation which may be short-lived or have lasting effects, de𓂃pending on the specific events and the resilience of the economy.

War and famine can be external factors 🐼that cause stagnation. A sudden increase in oil prices or a fall in demand for a key export could also induce a period of stagꦛnation for an economy.

Structural Stagnation

A stagnant economy can result from longer-term, structural conditions in a society. Mature economies are characterized by slower population growth, stable economic institutions, and slower growth rates. Classical economists refer to this type of stagnation as a stationary state, and 澳洲幸运5官方开奖结果体彩网:Keynesian economists consider it common in an advanced economy.

Institutional factors, such as entrenched power among incumbent special interest groups who oppose competition and openness, can induce economic stagnation. Western Europe experienced this type of economic stagnation during the 1970s and 1980s, dubbed 澳洲幸运5官方开奖结果体彩网:Eurosclerosis.

Stagnation can afflict underdeveloped or 澳洲幸运5官方开奖结果体彩网:emerging economies where stagnation persists due to the lack of change in political or economic institutions or regions with policies that discourage economic🎀 growth.

Overcoming Stagnation

Governments commonly i𒈔mplement a monetary policy or fiscal policy that spurs economic grܫowth using tools such as:

Increasing Government Spending

Government investment in infrastructure encourages new business projects in construction and materials and increases job creation. As wages increase, additional money flows into the economy 🎉raising demand for good෴s and services and increasing aggregate economic growth.

Decreasing Taxes and Regulation

By reducing taxes and regulations, businesses or small business owners retain more capital for investment and innov✱ation, improving growth in various sectors of the economy.

Lowering Interest Rates

When a cent🔥ral bank lowers interest rates, saving money becomes less attractive. People are more likely to increase their spending or invest in new businesses.

Stagnation vs. Stagflation vs. Recession

As an economy cycles from growth to decline, or decline to growth, it may have periods of stagnation, stagflatಌion, orℱ recession.

• Stagnation is a prolonged period of slow economic growth as measured by gross domestic product (GDP) and may be accompanied by high unemployment.
• 澳洲幸运5官方开奖结果体彩网:Stagflation is a slow economic cycle that includes high 澳洲幸运5官方开奖结果体彩网:inflation as well as high unemployment.
• A recession is a significant and prolonged downturn in economic activity usually measured by two consecutive quarters of negative gross domestic product (GDP).

Real-World Example of Stagnation

The 澳洲幸运5官方开奖结果体彩网:Great Recession, which began in 2008, kicked off a long period of economic stagnation, followed by a slow expansion from 2009 until the COVID-19 pandemic in 2020. GDP growth averaged 2.3% during this time. During the aftermath and recovery of the Great Recession, the Federal Reserve's monetary policy included 澳洲幸运5官方开奖结果体彩网:quantitative easing to help the United States spur the stalled economy.

The Bottom Line

Stagnation is a period of little or no growth in an economy characterized by a growth of less than 2-3% annually as measured by gross domestic product (GDP). Stagnation can be caused by business cycles, shocks to the economy, or the economic structure of a region. Governments commonly used both monetary and fiscal policies to reduce periods of prolonged stagnation.