Alex Haberis, Richard Harrison, Matt Waldron, 21 September 2017

In New Keynesian models, a promise to hold interest rates lower in the future has powerful effects on economic activity and inflation today. This result relies on a strong link between expected future policy rates and current activity, and also a belief that the policymaker will make good on the promise. This column argues that a tension between both of these creates a paradox – the stronger the expectations channel, the less likely it is that people will believe the promise in the first place. As a result, forward guidance promises are much less powerful than standard analysis suggests.

Philippe Bracke, 15 September 2017

Sales in the housing market have been low for a few years. In this video, Philippe Bracke explains how the original house price has an effect on the owner's decision to sell. This video was recorded in July 2017 at a macroeconomics conference organised by the Bank of England.

James Bullard, 30 August 2017

Since the financial crisis, we have seen very low interest rates in advanced economies. In this video, James Bullard discusses the concept of prices as neutral objects. This video was recorded in July 2017 at a macroeconomics conference organised by the Bank of England.

Ricardo Caballero, Alp Simsek, 30 August 2017

Interest rates continue to decline across the globe, while returns to capital remain constant or increasing. The reasons for this widening risky-safe gap are wide-ranging. This column illustrates the secular rise of risk intolerance in the global economy, and summarises a new macroeconomic framework suitable for this environment. It uses this framework to discuss the current global macroeconomic context, its underlying fragility, and the coexistence of low equilibrium interest rates and high speculation.

Konstantin Platonov, 25 August 2017

Unemployment rates rise during a financial crisis. In this video, Konstantin Platonov underlines the important link between pessismism about the financial market and the real economy. This video was recorded in July 2017 at a macroeconomics conference organised by the Bank of England.

Georg Graetz, Guy Michaels, 13 May 2017

Recoveries from recessions in the US used to involve rapid job generation, but job growth has failed to match GDP recovery after recent US recessions. This column examines the role of technology in this and asks whether jobless recoveries are a wider problem outside of the US. In the US, industries that are more prone to technological change experienced slower job growth during recent recoveries, but it appears unlikely that modern technologies are causing jobless recoveries outside of the US. This poses a puzzle as to the nature of recent jobless US recoveries. 

Alisdair McKay, Ricardo Reis, 14 July 2016

Brexit has raised the possibility of a recession on both sides of the Atlantic. Unable to use traditional remedies like monetary or fiscal policy stimulus, policymakers may consider automatic fiscal stabilisers. This column examines the impact of automatic stabilisers through social insurance on the business cycle, and how its impact can be used to mitigate recession. Unemployment insurance or food stamps would be better than progressive taxes at stimulating aggregate demand. The main economic channels policymakers must consider are those related to risk and precautionary savings. 

Andrew Bernard, Toshihiro Okubo, 23 April 2016

Recent research has found that certain firms increase their innovative activity during periods of falling demand. This column investigates this puzzle by analysing how Japanese firms adjust their product mix over the business cycle. During transitions from recession to expansion, firm-level product churning – that is, simultaneously adding and dropping products – increases by 25%. The findings lend support to the ‘trapped factor’ model, in which negative demand shocks see the redeployment of underemployed resources towards innovation processes.

Janet Currie, 15 January 2016

Studies of the effects of economic fluctuations on health have come to wildly different conclusions. This may be because the effects are different for different groups. Using US data, this column looks at the health consequences of the Great Recession on mothers, a sub-population that has thus far been largely neglected in the literature. Increases in unemployment are found to have large negative health effects and to increase incidences of smoking and substance abuse among mothers. These effects appear to be concentrated on disadvantaged groups such as minorities, and point to short- and long-term consequences for their children.

Manuel Funke, Moritz Schularick, Christoph Trebesch, 21 November 2015

Recent events in Europe provide ample evidence that the political aftershocks of financial crises can be severe. This column uses a new dataset that covers elections and crises in 20 advanced economies going back to 1870 to systematically study the political aftermath of financial crises. Far-right parties are the biggest beneficiaries of financial crises, while the fractionalisation of parliaments complicates post-crisis governance. These effects are not observed following normal recessions or severe non-financial macroeconomic shocks.

Brian Bell, Anna Bindler, Stephen Machin, 04 March 2015

Recessions can lead to an increase in youth unemployment, which could later negatively affect labour market outcomes. This column explores the effect of recessions on criminal activity. The findings indicate a substantial effect on initiating and forming youth careers. There is initially strong and eventually long-lasting detrimental effect of entering the labour market during a recession for individuals at the threshold of criminal activity. These effects are economically substantial and potentially more disturbing than short-run effects.

Jean Pisani-Ferry, 07 November 2014

A triple-dip recession in the Eurozone is now a distinct possibility. This column argues that additional monetary stimulus is unlikely to be effective, that the scope for further fiscal stimulus is limited, and that some structural reforms may actually hurt growth in the short run by adding to disinflationary pressures in a liquidity trap. The author advocates using tax incentives and tighter regulations to encourage firms to replace environmentally inefficient capital.

Jeffrey Frankel, 11 August 2014

The Italian economy is reported to have slipped back into recession in the first part of 2014. This characterisation is based on a criterion for a recession standard in Europe – two successive quarters of negative growth. However, there are other criteria to define a recession. US standards would treat Italy’s economic situation as one, six-year-long recession. Whereas one cannot say whether one criterion is superior to the other, announcing a recession has further implications.

David Berger, Joseph Vavra, 03 July 2014

Various stimulus programmes have been implemented in a response to the decline in consumption of durables since the Recession. This column argues that standard analysis of such programmes could be overstating their effectiveness. Aggregate durable spending is much less responsive to stimulus during recessions. Microeconomic frictions lead households to adjust their durable holdings less frequently.

Philippe Weil, 20 June 2014

The CEPR Business Cycle Dating Committee recently concluded that there is not yet enough evidence to call a business cycle trough in the Eurozone. Instead, the committee has announced a 'prolonged pause' in the recession. This Vox Talk discusses the possible directions that this situation could lead to and questions whether the Great Recession has harmed the Eurozone’s long-term growth prospects to the extent that meagre growth could become the 'new normal'.

CEPR CEPR Business Cycle Dating Committee, 17 June 2014

The simplest business cycle dating algorithm declares recessions over after two consecutive quarters of positive GDP growth. By that metric, the Eurozone recession has been over since 2013Q1. This column argues that growth and improvements in the labour market have been so anaemic that it is too early to call the end of the Eurozone recession. Indeed, if this is what an expansion looks like, then the state of the Eurozone economy might be even worse than economists feared.

Paul Beaudry, Dana Galizia, Franck Portier, 01 June 2014

Hayek viewed recessions as working out excessive investments; Keynes viewed them as demand shortages. This column argues that they may not be as mutually exclusive as many think. Recessions may reflect periods of liquidation but this may be associated with inefficient adjustment involving unemployment and precautionary savings. Stimulative policy may be desirable even if it delays the full recovery.

Barbara Petrongolo, 27 April 2014

Long-term unemployment in the UK increased substantially after the recent recession. Many policy interventions have attempted to address this problem. The UK’s long-term unemployed face tougher requirements in return for their benefits – community work, training programmes, or daily visits to the Jobcentre. This column tries to assess the likely success of the UK government’s strategy by surveying the effectiveness of the ‘sticks’ and ‘carrots’ of active labour market policies.

Antonio Fatás, Ilian Mihov, 14 August 2013

The last recession in the US ended in June 2009. Yet, three years on, unemployment remains high. This column argues that we need to better understand how business cycles of recession and expansion work. Detailed evidence from the US suggests that recoveries are not simply mirror images of recessions. Because of its policy relevance, economists and policymakers must acknowledge that the pattern of recession/recovery has significantly changed over the last half century.

Laurence Kotlikoff, 16 December 2012

A ‘self-fulfilling recession’ is a long-established idea in economics. This column argues that the US’s economic malaise continues to be caused by leaders’ hysteria rather than by actual engrained economic problems. Obama and Congress need to stop scaring the nation about the ‘fiscal cliff’ because, ultimately, they are coordinating expectations on there being a recession. Tackling the right policies now, and sending out the right message, will help more than hysteria.

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