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开奖号码历史查询:growth recession, temporary economic shock, or part of an ecﷺonomy's long-term stru꧃ctural 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开奖号码历史查询:recession to growth or from gro🧜wth to recession, they may experi♑ence a time of stagnation.

Cyclical Stagnation

Stagnation can occur as a temporary condition in the course of an 澳洲幸运5开奖号码历史查询:economic cycle or 澳洲幸运5开奖号码历史查询:business cycle as a recession is ending and recovery is beginning. During these periods, both 澳洲幸运5开奖号码历史查询:monetary policies and 澳洲幸运5开奖号码历史查询:fiscal policies may be implemented to ♐avoid prolonged stagnation.

Economic Shocks

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

War and famine can be external factors that c🉐ause stagnation. A sudden increase in oil prices or a fall in demand for a key export could also induce a period of stagnation 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开奖号码历史查询: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开奖号码历史查询:Eurosclerosis.

Stagnation can afflict underdeveloped or 澳洲幸运5开奖号码历史查询:emerging economies where stagnation persists due to the lack of change in political or economic institutions or regionꦉs with policies that discourage economic growth.

Overcoming Stagnation

Governments ꦺcommonly implement a monetary policy or fiscal policy that spuꦏrs economic growth using tools such as:

Increasing Government Spending

Government investment in infrastructu🌃re encourages new business projects in construction and materials and increases job creation. As wages increase, additional money flꦓows into the economy raising demand for goods 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 invest🍎ment and innovation, improving 𝓰growth in various sectors of the economy.

Lowering Interest Rates

Wh🔴en a central 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 de🔯cline, or decline to growth, it may have p🉐eriods of stagnation, stagflation, or 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开奖号码历史查询:Stagflation is a slow economic cycle that includes high 澳洲幸运5开奖号码历史查询: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开奖号码历史查询: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开奖号码历史查询: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.