If I see one more model of secular stagnation and negative equilibrium real interest rates, that does not include land....I'm going to throw a real wobbly.
What is it with you townies? Have you never looked out of the window, when you fly (do you ever drive?) from one city to another, and wondered about all that stuff you see out there? It's called "land". It grows food, that you eat. And that land is valuable stuff, and there's a lot of it, and it can last a very long time, and it pays rent (or owner-equivalent rent). And if the rent on that land is strictly positive (which it is), and if the price of that land is finite (which it is), then the rate of interest you get by dividing that annual rent on land by the price of land is going to be strictly positive. And that's a real rate of interest, because land is real stuff, and what it produces is real stuff too.
So when you go to a helluva lot of trouble to build a model with a negative equilibrium real rate of interest, and it's a very fancy complicated model, but it totally ignores land, I really wonder where you are coming from. Actually I don't wonder. I know where you are coming from. You are coming from the town, or the big city, where you can easily forget about land. But even then: you know that stuff your house or condo is built on? That's called "land" too.
It didn't used to be this way. The Physiocrats, Malthus, Ricardo, didn't ignore land. Land was central to their models. Now I know that whether or not you should include something in your model depends on what you want your model for. And that it is perfectly OK to ignore land in some models. But if you have a model of secular stagnation and negative real interest rates that ignores land, well, your model is just hopelessly and fatally wrong. Dead wrong. It's just not grounded.
You don't need fiscal policy to "solve" the problem of permanently negative equilibrium real interest rates. You need land. You cityfolk need to pay attention to land. Maybe you haven't noticed that land prices have been rising recently, worldwide? Think that might have something to do with low equilibrium real interest rates and secular stagnation? Think that land might maybe be a savings vehicle in an overlapping generations model? Think that the bursting of the housing land "bubble" might maybe have been just a conjunctural hiccup in a much bigger secular story?
I read the abstract and introduction of the Eggertsson and Mehrotra paper (pdf) (HT Paul Krugman), got the gist of it, but saw no mention of "land". Then I skipped to the references, saw no reference to Stefan Homburg's classic paper, so I stopped reading. All that effort to build that fancy model, all for nothing. (Here is Stefan Homburg's latest working paper (pdf) on the subject, which shows that land is macroeconomically as important as capital, and more important than public debt.)
Lefties sometimes complain about a class bias in research. I'm going to complain about an urban bias in research. Some of you academics should be rusticated for a bit, until you learn better.