'Secular Stagnation or Secular Boom?'

Antonio Fatás:

Secular stagnation or secular boom?: The notion that some countries are caught in a long and protracted period of low growth ... has been labeled "secular stagnation". The pessimism that the idea of secular stagnation has created has been reinforced by the notion the potential for emerging markets to grow is becoming weaker. ...

Let's start with a simple chart that summarizes the pattern of annual growth in ... advanced and emerging markets...

... So stagnation might be the right label for 50% of the world, but accelerating growth is the right label for the other half.

And if we look at the engines of growth, in particular investment rates (in physical capital) we can see again the divergence in performance.

... Looking at the above charts... Could it be that investment opportunities in emerging markets moved capital away from advanced economies? Not obvious because we know that the explosion in investment rates in emerging markets came in many cases with even larger increases in saving rates and (financial) capital flew away from these countries. In fact, interest rates in the world were trending downwards during this period. And this makes the performance of advanced economies even more surprising: despite a favorable environment in terms of low interest rates, investment and growth declined.