Summary of Understanding the New Normal

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Understanding the New Normal summary
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GDP growth in the United States continues to slog forward at a pace far below its long-run historical average of about 3% annually in the years following World War II. Particularly troubling is the anemic recovery following the Great Recession. Despite the Federal Reserve’s attempts to boost the economy, strong GDP growth remains elusive. Economists Etienne Gagnon, Benjamin K. Johannsen and David Lopez-Salido contend that constrained US growth is the result of an entirely predictable outcome based on demographic patterns. getAbstract recommends their scholarly report to executives and investors interested in understanding this “new normal.”

About the Authors

Etienne Gagnon, Benjamin K. Johannsen and David Lopez-Salido are economists with the Board of Governors of the Federal Reserve System.



The Federal Reserve’s attempts in the wake of the Great Recession to reinvigorate the US economy through extraordinarily accommodative monetary policy have generated lackluster results. Some experts hold deleveraging and credit obstacles accountable for persistently low growth and low interest rates, while others point to “secular stagnation.” However, a third option may be responsible: Demographic shifts in “fertility, labor supply, life expectancy, family composition and international migration” statistically explain 1.25 percentage point...

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