We provide a Keynesian growth theory in which pessimistic expectations can lead to very persistent, or even permanent …, slumps characterized by unemployment and weak growth. We refer to these episodes as stagnation traps, because they consist in … the joint occurrence of a liquidity and a growth trap. In a stagnation trap, the central bank is unable to restore full …

Why do advanced economies fall into prolonged periods of economic stagnation, particularly in the aftermath of credit … that financially more deregulated economies are more likely to experience persistent stagnation. In the short run, credit …