Busts hurt more than booms help: New lessons for growth policy from global wellbeing surveys

Jan-Emmanuel De Neve, Michael I. Norton 08 October 2014

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How do macroeconomic fluctuations affect individual welfare? Nobel laureate Robert Lucas famously suggested that the cost of business cycles in terms of consumption is insignificant (Lucas 1987, 2003). Such findings paved the way for a straightforward growth policy that tends to be evaluated on the basis of how much the economy has grown rather than how the economy has grown.

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Topics:  Frontiers of economic research Macroeconomic policy

Tags:  wellbeing, GDP growth, recessions, booms

The effectiveness of tax rebates as countercyclical fiscal policy

Jonathan A. Parker 17 June 2014

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A decade ago, there was general agreement among practitioners and academics about the conduct of policy to stabilise developed economies. Governments limited anti-recessionary policy to responses by central banks, which in turn limited their policies to adjustments in short-term interest rates through open market operations. Policymakers and researchers disagreed mostly about the scale and timing of interest rate policy within the context of the New Keynesian model of how stabilisation policy worked in principle (as in Woodford 2003).

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Topics:  Monetary policy

Tags:  recessions, fiscal stimulus, tax rebates

“There will be growth in the spring”: How well do economists predict turning points?

Hites Ahir, Prakash Loungani 14 April 2014

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Since the onset of the Great Recession, much of the world has been in a state of economic winter: nearly 50 countries were in recession in 2009 and 15 countries slipped into recession in 2012. After weak global growth in 2013, economic forecasters are predicting a rosier outlook this year and next. Can these forecasts be trusted? Or are forecasters simply intoning – like Chauncey Gardner, the character played by Peter Sellers in the movie Being There – that “there will be growth in the spring”?

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Topics:  Global crisis

Tags:  recessions, forecasting

Fact-checking financial recessions: US-UK update

Moritz Schularick, Alan Taylor 24 October 2012

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Debate on the “What should we have expected in terms of economic recovery?” question is raging on the internet (Reinhart and Rogoff 2012, Taylor 2012). Since publishing our widely-read column a few weeks ago, we have received several enquiries asking if we can apply the same benchmarks to evaluate the current performance of the UK economy. We now can.

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Topics:  Economic history Global crisis Macroeconomic policy

Tags:  financial crises, recessions, credit

Recessions and small business access to credit: Lessons for Europe from interstate banking deregulation in the US

Mathias Hoffmann, Iryna Stewen 19 February 2012

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The European sovereign debt crisis is often viewed as a banking crisis in disguise (see, for instance, Mody and Sandri 2011 on this site). Policymakers are rightly concerned about the prospect that ever more cautious banks may eventually stop lending to small and medium-sized businesses (or enterprises, known as SMEs). While large firms can tap capital markets directly, SMEs are particularly bank dependent.

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Topics:  International finance

Tags:  recessions, credit, SMEs, banking deregulation

Calling recessions in real time

James D. Hamilton 18 July 2010

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Is the world economy about to experience a "double-dip" recession, going back into a new downturn before the recovery from the previous recession is even complete? Or, if there is a subsequent downturn, should it be described as a new, separate recession? The answer requires an objective characterisation of what we mean when we say the economy is in a recession.

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Topics:  Global crisis Global economy

Tags:  recessions, economic forecasting, business cycle

Oil prices and the economic recession of 2007-08

James D. Hamilton 16 June 2009

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Big oil price increases that were associated with events such as the 1973-74 embargo by the Organisation of Arab Petroleum Exporting Countries, the Iranian Revolution in 1978, the Iran-Iraq War in 1980, and the First Persian Gulf War in 1990 were each followed by a global economic recession. The price of oil doubled between June 2007 and June 2008, a bigger price increase than in any of those four earlier episodes.

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Topics:  Energy Global economy

Tags:  oil shocks, recessions

From recession to recovery: A long and hard road

Prakash Kannan, Marco E Terrones, Alasdair Scott 06 May 2009

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The advanced economies are experiencing a financial crisis and a highly synchronised recession, which is a very rare combination of events. This raises three questions; Are recessions and recoveries associated with financial crises different from others? What are the main features of globally synchronised recessions? Can countercyclical policies help to shorten recessions and strengthen recoveries?

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Topics:  Global crisis Global economy

Tags:  economic recovery, financial crises, recessions

What Keynes should have said

Roger E. A. Farmer 04 February 2009

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For more than seventy years, policy makers have used Keynesian monetary and fiscal policies to control recessions (Keynes 1936). Although these policies are widely perceived to have been successful in stabilising the business cycle, academics gave up on Keynesian theory in the 1970s. The appearance of stagflation led to the adoption of the Phelps-Friedman hypothesis of a natural rate of unemployment, and it caused academics to abandon the Keynesian idea of many steady-state unemployment equilibria (Cross 1995).

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Topics:  Macroeconomic policy

Tags:  unemployment, recessions, Keynesian economics

Are there cleansing effects of recessions? Entry and exit of manufacturing plants over the business cycle

Yoonsoo Lee, Toshihiko Mukoyama 07 January 2008

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Creative destruction is a major driving force of modern market economies.1 Firms enter and exit the marketplace, plants are built and destroyed, and workers change jobs and occupations. In recent decades, economists have started to learn that the amount of reallocation that occurs in market economies is massive.2 It is the rule rather than the exception, and it is essential in a well-functioning market economy.

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Topics:  Macroeconomic policy

Tags:  business cycles, recessions, creative destruction, US manufacturing