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Saturday, December 17, 2011

"A Financial Crisis Needn’t Be a Noose"

It doesn't have to be this way:

A Financial Crisis Needn’t Be a Noose, by Christina Romer, Commentary, NY Times: Recessions after financial crises are long and severe, and the subsequent recoveries are protracted. That is the bold conclusion of “This Time Is Different,” the book by Carmen Reinhart and Kenneth Rogoff, and it has become conventional wisdom. ...
But while there are strong patterns in the authors’ mountains of data, this simple summary misses an important fact: There’s dramatic variation in the aftermaths of crises, and much of it is caused by how policy makers respond. ......
The ... importance of the policy response in determining the effects of crises argues strongly against complacency here at home. A country as creditworthy as the United States can continue to use fiscal stimulus to help return the economy to full employment. And, as I argued in a previous column, there’s much more the Fed could be doing. Whether we continue to fester or finally embark on a robust recovery depends on whether we choose to use the tools available. ...

    Posted by on Saturday, December 17, 2011 at 02:06 PM in Economics, Fiscal Policy, Monetary Policy | Permalink  Comments (23)

          


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