scholarly journals Escaping the Great Recession

2017 ◽  
Vol 107 (4) ◽  
pp. 1030-1058 ◽  
Author(s):  
Francesco Bianchi ◽  
Leonardo Melosi
Keyword(s):  
Lower Bound ◽  
Great Recession ◽  
Public Debt ◽  
Zero Lower Bound ◽  
Policy Uncertainty ◽  
The Great Recession ◽  
Us Economy ◽  
Long Run ◽  
The Us ◽  
Deep Recession

We show that policy uncertainty about how the rising public debt will be stabilized accounts for the lack of deflation in the US economy at the zero lower bound. We first estimate a Markov-switching VAR to highlight that a zero-lower-bound regime captures most of the comovements during the Great Recession: a deep recession, no deflation, and large fiscal imbalances. We then show that a microfounded model that features policy uncertainty accounts for these stylized facts. Finally, we highlight that policy uncertainty arises at the zero lower bound because of a trade-off between mitigating the recession and preserving long-run macroeconomic stability. (JEL E31, E32, E52, E62, G01, H63)

Path dependence, the COVID-19 crisis, and inequality in the United States

2021 ◽  
Vol 18 (2) ◽  
pp. 198-206
Author(s):  
Daniele Tavani
Keyword(s):  
Great Recession ◽  
Path Dependence ◽  
The United States ◽  
Economic Security ◽  
The Great Recession ◽  
Us Economy ◽  
Long Run ◽  
The Us ◽  
Historical Trajectory

This paper considers both secular and medium-run trends to argue that the US economy was already vulnerable to shocks before the COVID-19 crisis. Long-run trends have shown a pattern of secular stagnation and increasing inequality since the 1980s, while the economy has displayed hysteresis during the sluggish recovery from the Great Recession. The immediate policy response through the Coronavirus, Relief and Economic Security (CARES) Act highlighted the coordinating role of fiscal policy on the economy, but also showcased limits, especially with regard to the paycheck protection program. The historical trajectory of the US economy before the COVID-19 crisis cast serious doubts on recent cries of ‘overheating’ and inflationary pressures that should supposedly arise from the $1.9 trillion relief package just signed into law by President Biden. Projecting forward to the long run, redistribution policies may provide useful first steps in reversing the trends of rising inequality and declining productivity growth that the US economy has seen over the last few decades.

scholarly journals Uncertainty at the Zero Lower Bound

2017 ◽  
Vol 9 (3) ◽  
pp. 186-221 ◽  
Author(s):  
Taisuke Nakata
Keyword(s):  
Lower Bound ◽  
Zero Lower Bound ◽  
Price Model ◽  
Exogenous Shocks ◽  
Us Economy ◽  
Conditional Expectations ◽  
The Us ◽  
Key Features ◽  
Future Path ◽  
Deep Recession

When the policy rate is at the zero lower bound (ZLB), an increase in uncertainty regarding the future path of exogenous shocks alters the conditional expectations of relevant prices facing households and firms. Accordingly, an increase in uncertainty alters consumption, inflation, and output to a greater extent when the policy rate is constrained than otherwise. Using an empirically rich sticky-price model calibrated to match key features of the US economy, I find that uncertainty can exacerbate the decline of output by about 10 percent in a deep recession that pushes the policy rate to the ZLB. (JEL E23, E31, E32, E43, E52, E58)

scholarly journals Did Smaller Firms Face Higher Costs of Credit During the Great Recession? A Vector Error Correction Analysis with Structural Breaks

2018 ◽  
Vol 10 (3) ◽  
pp. 1
Author(s):  
Louisa Kammerer ◽  
Miguel Ramirez
Keyword(s):  
Lower Bound ◽  
Error Correction ◽  
Great Recession ◽  
Structural Breaks ◽  
Zero Lower Bound ◽  
Large Firms ◽  
Vector Error Correction ◽  
The Great Recession ◽  
Vector Error ◽  
The Cost

This paper examines the challenges firms (and policymakers) encounter when confronted by a recession at the zero lower bound, when traditional monetary policy is ineffective in the face of deteriorated balance sheets and high costs of credit. Within the larger body of literature, this paper focuses on the cost of credit during a recession, which constrains smaller firms from borrowing and investing, thus magnifying the contraction. Extending and revising a model originally developed by Walker (2010) and estimated by Pandey and Ramirez (2012), this study uses a Vector Error Correction Model with structural breaks to analyze the effects of relevant economic and financial factors on the cost of credit intermediation for small and large firms. Specifically, it tests whether large firms have advantageous access to credit, especially during recessions. The findings suggest that during the Great Recession of 2007-09 the cost of credit rose for small firms while it decreased for large firms, ceteris paribus. From the results, the paper assesses alternative ways in which the central bank can respond to a recession facing the zero lower bound.

scholarly journals Is Government Spending at the Zero Lower Bound Desirable?

2019 ◽  
Vol 11 (3) ◽  
pp. 147-173 ◽  
Author(s):  
Florin O. Bilbiie ◽  
Tommaso Monacelli ◽  
Roberto Perotti
Keyword(s):  
Lower Bound ◽  
Great Recession ◽  
Government Spending ◽  
Welfare Effects ◽  
Zero Lower Bound ◽  
Present Value ◽  
Government Consumption ◽  
High Consumption ◽  
The Us ◽  
Parameter Values

We build a medium-scale DSGE model and calibrate it to fit the main macroeconomic variables during the US Great Recession. Using it to evaluate the welfare effects of increasing government consumption at the zero lower bound beyond what was actually observed in the data, we reach three main results. First, the increase in government consumption after 2008, albeit small in present value terms, was close to optimal. Second, frontloading the same stimulus would have been welfare-improving. Third, larger welfare effects occur in our model for parameter values implying either large welfare costs of modest recessions (e.g., high consumption curvature), or outright large recessions. (JEL E12, E32, E43, E62, H50)

US household deleveraging following the Great Recession – a model-based estimate of equilibrium debt

2015 ◽  
Vol 15 (1) ◽  
Author(s):  
Bruno Albuquerque ◽  
Ursel Baumann ◽  
Georgi Krustev
Keyword(s):  
Great Recession ◽  
Balance Sheet ◽  
State Level ◽  
Household Debt ◽  
The Great Recession ◽  
Us Economy ◽  
Pooled Mean Group ◽  
Level Data ◽  
The Us ◽  
Income Ratio

AbstractThe balance sheet adjustment in the household sector was a prominent feature of the Great Recession that is widely believed to have held back the cyclical recovery of the US economy. A key question for the US outlook is therefore whether household deleveraging has ended or whether further adjustment is needed. The novelty of this paper is to estimate a time-varying equilibrium household debt-to-income ratio determined by economic fundamentals to examine this question. The paper uses state-level data for household debt from the FRBNY Consumer Credit Panel over the period 1999Q1–2012Q4 and employs the Pooled Mean Group (PMG) estimator developed by Pesaran, Shin, and Smith (1999), adjusted for cross-section dependence. The results support the view that, despite significant progress in household balance sheet repair, household deleveraging still had some way to go as of 2012Q4, as the actual debt-to-income-ratio continued to exceed its estimated equilibrium. The baseline conclusions are rather robust to a set of alternative specifications. Going forward, our model suggests that part of this debt gap could, however, be closed by improving economic conditions rather than only by further declines in actual debt. Nevertheless, the normalisation of the monetary policy stance may imply challenges for the deleveraging process by reducing the level of sustainable household debt.

scholarly journals Universal resilience patterns in labor markets

2021 ◽  
Vol 12 (1) ◽  
Author(s):  
Esteban Moro ◽  
Morgan R. Frank ◽  
Alex Pentland ◽  
Alex Rutherford ◽  
Manuel Cebrian ◽  
...  
Keyword(s):  
Labor Market ◽  
Labor Markets ◽  
Great Recession ◽  
Urban Policy ◽  
Economic Resilience ◽  
The Great Recession ◽  
Us Economy ◽  
The Us ◽  
Skill Requirements ◽  
Us Cities

AbstractCities are the innovation centers of the US economy, but technological disruptions can exclude workers and inhibit a middle class. Therefore, urban policy must promote the jobs and skills that increase worker pay, create employment, and foster economic resilience. In this paper, we model labor market resilience with an ecologically-inspired job network constructed from the similarity of occupations’ skill requirements. This framework reveals that the economic resilience of cities is universally and uniquely determined by the connectivity within a city’s job network. US cities with greater job connectivity experienced lower unemployment during the Great Recession. Further, cities that increase their job connectivity see increasing wage bills, and workers of embedded occupations enjoy higher wages than their peers elsewhere. Finally, we show how job connectivity may clarify the augmenting and deleterious impact of automation in US cities. Policies that promote labor connectivity may grow labor markets and promote economic resilience.

scholarly journals Forecasting the Recovery from the Great Recession: Is This Time Different?

2013 ◽  
Vol 103 (3) ◽  
pp. 147-152 ◽  
Author(s):  
Kathryn M. E Dominguez ◽  
Matthew D Shapiro
Keyword(s):  
Great Recession ◽  
The Political ◽  
Slow Recovery ◽  
Financial Shocks ◽  
Forecast Revisions ◽  
The Great Recession ◽  
News Reports ◽  
Us Economy ◽  
The Us ◽  
Fiscal Shocks

This paper asks whether the slow recovery of the US economy from the trough of the Great Recession was anticipated, and identifies some of the factors that contributed to surprises in the course of the recovery. We construct a narrative using news reports and government announcements to identify policy and financial shocks. We then compare forecasts and forecast revisions of GDP to the narrative. Successive financial and fiscal shocks emanating from Europe, together with self-inflicted wounds from the political stalemate over the US fiscal situation, help explain the slowing of the pace of an already slow recovery.

Regimes of Realization: Using Marx and Kalecki to Understand the US Economy, including the Great Recession and the “Recovery”

2018 ◽  
Vol 50 (4) ◽  
pp. 757-772
Author(s):  
David M. Brennan
Keyword(s):  
United States ◽  
Great Recession ◽  
The United States ◽  
Profit Rate ◽  
The Great Recession ◽  
Us Economy ◽  
The Us ◽  
The Future ◽  
Jel Classifications

By integrating selected Kaleckian and Marxian insights, this paper analyzes the sources of profit realization and the profit rate in the US economy from 1964–2013. The most significant sources of profit realization in the United States are capitalists’ consumption and workers’ debt, which historically have been under appreciated both theoretically and empirically. The insights gleaned by analyzing the sources of profit realization aid in understanding the Great Recession and the future of the US economy. JEL Classifications: B51, E11

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