International Economics

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Есonomic stagnation in emerging market countries: should this justify 
?Keynes's law

Sri Indah Nikensari, et al

Abstract

This study aims to determine the aggregate demand factors that affect economic stagnation in middle-income emerging market countries, and whether Keynes's law can be a solution to solve the problem with increase demand. Using panel data from official sources such as the World Bank, several factors were tested to determine the effect on economic stagnation, at the 2010-2015 and 2010-2016 periods. By employing panel data modelling (with fixed effect model), the findings suggest that the decrease in household consumption, weak foreign investment, inefficient government spending and decreased export competitiveness have a significant positive effect on economic stagnation, while a low inflation rate has an insignificant effect on household consumption, as well as high lending interest rate have an insignificant effect on the decrease in the inflow of foreign direct investment. Therefore, Keynes's law must be applied appropriately by increasing aggregate demand to encourage declining economic growth through government interference

Keywords: stagnation; emerging market; aggregate side; Keynes's law

DOI: 10.1504/IJEPEE.2019.102780

International Journal of Economic Policy in Emerging Economies, 2019 Vol.12 No.3, pp.299 - 314

 Introduction
 Does the global economic stagnation (ES) continue until late 2016? Because, the world economic growth in 2016 is slowing and lower than previously estimated, that is only at 2.4% from 3.9% forecast

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  the factors that affect ES can be seen in aggregate demand (AD) and aggregate supply (AS). The model of AD and AS are models in macroeconomic theory that explain the relationship between price and output levels, as explained by Keynes. Changes in prices will lead to changes in demand, and prices are strongly influenced by the rate of inflation