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Tuesday, November 18, 2014

The Permanent Effects of the Great Recession

At Moneywatch:

The Permanent Effects of the Great Recession

It was edited quite a bit, e.g. here is my opening for comparison:

Economists have long believed that shocks to aggregate demand are temporary. It might take time to return to the previous trend rate of output growth, years in some cases, but given enough time the economy will return to the pre-recession path. This graph from Nobel Prize winning economist Robert Lucas, for example, illustrates this point of view. The red line is trend economic growth, and the blue line shows how aggregate demand shocks cause the economy to deviate from the trend, and then return.
However, the experience of the great recession along with recent work such as “Potential Output and Recessions: Are We Fooling Ourselves?” from economists Robert F. Martin, Teyanna Munyan, and Beth Anne Wilson at the Federal Reserve call this into question. ...

    Posted by on Tuesday, November 18, 2014 at 08:19 AM in Economics, MoneyWatch | Permalink  Comments (22)


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