Philippe Bacchetta, Eric van Wincoop, 27 June 2013

How can we explain the rapid spread of the Great Recession? This column focuses on international co-movements to explain its global nature, developing a model that shows the global panic to be a rational self-fulfilling mechanism and global co-movements to occur even in countries without much economic integration. Perhaps most importantly, the global economy was ripe for panic due to historically unprecedented economic integration, tight credit, limited scope for monetary policy and limited room for fiscal policy due to high debt levels.

Events

CEPR Policy Research