Secular Stagnation, Financial Frictions, and Land Prices

• A model is present in which transitory financial shocks can generate a secular stagnation output, asset prices, and interest rates. The strong propagation results from large endogenous price volatility of land makes the collateral constraints quantitatively important. high achieved by complementarity services consumption households’ preference, disciplined micro data. We explore persistent slumps rate. channel works through sensitivity prices with respect to fundamental, between preference. When this micro-level evidence, equilibrium features non-linear dynamics two steady states. Large push economy into constrained region low rate firm unwilling save out friction, leading stagnation. (JEL codes: E13, E32, E44)