Terence Mills, Forrest Capie, Charles Goodhart, 18 April 2019

It is well known that the slope of the term structure of interest rates contains information for forecasting the likelihood of a recession in the US. This column examines whether the same is true for the UK. Focusing on three periods – the pre-WWI era, the inter-war years, and the post-WWII period – it finds strong support for the inverted yield curve being a predictor of UK recessions for both the pre-WWI and post-WWII periods, but the evidence is less conclusive for the inter-war years.

Francesco Bianchi, Diego Comin, Howard Kung, Thilo Kind, 26 February 2019

During the Great Recession, several European countries implemented fiscal austerity measures to reduce sovereign debt. This column argues that such policies affect the decision to adopt new technologies and can have negative consequences for productivity and growth in the medium run. Thus, low technology adoption due to fiscal austerity can lead to slow recoveries. These, in turn, can make the fiscal stabilisation unnecessarily costly. Fiscal austerity is desirable only if it is able to reduce the cost of financing debt quickly.

Ralf Fendel, Nicola Mai, Oliver Mohr, 17 January 2019

The flattening of the US yield curve has left academics, central bankers and market commentators divided, with one camp interpreting it as a sign of impending recession (in line with historical patterns), and the other camp arguing that this time is different given unprecedented changes in monetary policy and other structural forces. This column argues that the ECB’s quantitative easing programme undermined the performance of term spreads as predictors of recessions. It suggests and tests a modified term spread and several other variables that are more successful at predicting recessions. 

Miguel Morin, 16 April 2016

A longstanding question in economics is whether labour-saving technology affects firms in the medium term by increasing output, by decreasing employment, or both. This column provides evidence on this issue using a novel dataset from the concrete industry during the Great Depression. Cheaper electricity caused a decrease in the labour share of income, an increase in productivity and electrical capital intensity, and a decrease in employment. Furthermore, these effects were stronger in counties where the Depression hit hardest, consistent with the idea of ‘the cleansing effect of recessions’.

Emmanuel De Veirman, 07 December 2015

Firms are believed to have more uncertain prospects during recessions, possibly deepening economic downturns. This column argues that the relationship between firm uncertainty and GDP growth is much weaker than is commonly assumed. Further, firms’ prospects were not particularly uncertain during the Great Recession. Lastly, firm-specific uncertainty does not appear to have an important effect on the business cycle.

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

How do macroeconomic changes affect people’s wellbeing?  This column presents evidence that the life satisfaction of individuals is between two and eight times more sensitive to negative economic growth than it is to positive economic growth. Engineering economic ‘booms’ that risk even short ‘busts’ is unlikely to improve social wellbeing in the long run.

Jonathan Parker, 17 June 2014

Governments around the world are searching for macro-stimulation instruments. This column discusses evidence showing that rebate-type payments policies generate substantial increases in demand for goods and services. In particular, a large portion of tax rebates are spent rapidly on arrival.

Hites Ahir, Prakash Loungani, 14 April 2014

Forecasters have a poor reputation for predicting recessions. This column quantifies their ability to do so, and explores several reasons why both official and private forecasters may fail to call a recession before it happens.

Moritz Schularick, Alan Taylor, 24 October 2012

Is the sluggish growth we see in the North Atlantic economies normal? This column updates the authors’ 5 October 2012 column to include an analysis of the UK. The original column looks at 14 advanced economies over the past 140 years and shows that larger credit booms during expansions have been systematically associated with more severe and prolonged slumps. Measured against the historical benchmark, the recent US recovery has been far better than could have been expected. The same cannot be said of the UK’s growth performance.

Mathias Hoffmann, Iryna Stewen, 19 February 2012

Few would deny that there is a strong link between the health of a country’s banks and its public finances. With that in mind, this column argues that the banking system can learn from banking deregulation in the US, with knock on effects for Europe’s sovereign debt crisis.

James Hamilton, 18 July 2010

Is the world economy about to experience a "double-dip" recession? This column argues that, while there may be a recession on the way, the current recession ended in the summer of 2009. Any subsequent downturn should thus be labelled a new recession.

James Hamilton, 16 June 2009

Past oil price spikes associated with Middle East conflicts and OPEC embargos were each followed by a global economic recession. This column argues that the onset of the current economic downturn of is also partly attributable to a sharp increase in the price of oil. Moreover, the interaction of high oil prices and housing problems contributed to the severity of the downturn.

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

Two features of the current recession – its association with a deep financial crisis and its highly synchronised nature – suggest that it is likely to be unusually severe and followed by a weaker-than-average recovery. Current and near- term policy responses are the key to understand how the recession will evolve this time.

Roger Farmer, 17 September 2018

Originally published in February 2009, this column proposes a new paradigm to reconcile Keynesian economics with general equilibrium theory. It suggests that, just as it sets the fed funds rate to control inflation, the Fed should set a stock market index to control unemployment. This would not let every manufacturing firm and every bank fail at the same time “as a result of speculative movements in markets that serve no social purpose.”

Yoonsoo Lee, Toshihiko Mukoyama, 07 January 2008

It is commonly believed that business cycles ‘cleanse’ industry with waves of creative destruction. New research shows that entry is higher in booms than busts, but exit rates and the type of exiting firms, are steady over the cycle. Plants entering during recessions, however, are larger and more productive –‘creative entry’ rather than ‘creative destruction’.

Events

  • 17 - 18 August 2019 / Peking University, Beijing / Chinese University of Hong Kong – Tsinghua University Joint Research Center for Chinese Economy, the Institute for Emerging Market Studies at Hong Kong University of Science and Technology, the Guanghua School of Management at Peking University, the Stanford Center on Global Poverty and Development at Stanford University, the School of Economics and Management at Tsinghua University, BREAD, NBER and CEPR
  • 19 - 20 August 2019 / Vienna, Palais Coburg / WU Research Institute for Capital Markets (ISK)
  • 29 - 30 August 2019 / Galatina, Italy /
  • 4 - 5 September 2019 / Roma Eventi, Congress Center, Pontificia Università Gregoriana Piazza della Pilotta, 4, Rome, Italy / European Center of Sustainable Development , CIT University
  • 9 - 14 September 2019 / Guildford, Surrey, UK / The University of Surrey

CEPR Policy Research