Do Recessions Affect Potential Output

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Do Recessions Affect Potential Output

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Author : Jane Haltmaier
language : en
Publisher:
Release Date : 2013-05-12

Do Recessions Affect Potential Output written by Jane Haltmaier and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-05-12 with Business & Economics categories.

A number of studies have looked at the effect of financial crises on actual output several years beyond the crisis. This study examines whether the growth of potential output also is affected by recessions, whether or not they include financial crises. Trend per capita output growth is calculated using HP filters, and average growth is compared for the two years preceding a recession, the two years immediately following a recession peak, and the two years after that. Panel regressions are run to determine whether characteristics of recessions, including depth, length, extent to which they are synchronized across countries, and whether or not they include a financial crisis, can explain the cumulative four-year loss in the level of potential output following an output peak preceding a recession. The main result is that the depth of a recession has a significant effect on the loss of potential for advanced countries, while the length is important for emerging markets. These results imply that the Great Recession might have resulted in declines in trend output growth averaging about 3% for the advanced economies, but appear to have had little effect on emerging market trend growth. Figures and tables. This is a print on demand report.

Potential Output And Recessions

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Author : Robert Martin
language : en
Publisher:
Release Date : 2015

Potential Output And Recessions written by Robert Martin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Business cycles categories.

"This paper studies the impact of recessions on the longer-run level of output using data on 23 advanced economies over the past 40 years. The authors find that severe recessions have a sustained and sizable negative impact on the level of output. This sustained decline in output raises questions about the underlying properties of output and how they model trend output or potential around recessions. They find little support for the view that output rises faster than trend immediately following recessions to close the output gap. Indeed, they find little evidence that growth is faster following recessions than before; if anything post-trough growth is slower. Instead, they find that output gaps close importantly through downward revisions to potential output rather than through rapid post-recession growth. The revisions are made slowly (over years) - a process that leads to an initial underestimation of the effect of recessions on potential output and a corresponding under-prediction of inflation."--Abstract.

Fiscal Policy And Recessions

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Author : Christopher Zuber
language : en
Publisher:
Release Date : 2022

Fiscal Policy And Recessions written by Christopher Zuber and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022 with categories.

Hysteresis And Business Cycles

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Author : Ms.Valerie Cerra
language : en
Publisher: International Monetary Fund
Release Date : 2020-05-29

Hysteresis And Business Cycles written by Ms.Valerie Cerra and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-05-29 with Business & Economics categories.

Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.

Booms Crises And Recoveries A New Paradigm Of The Business Cycle And Its Policy Implications

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Author : Ms.Valerie Cerra
language : en
Publisher: International Monetary Fund
Release Date : 2017-11-16

Booms Crises And Recoveries A New Paradigm Of The Business Cycle And Its Policy Implications written by Ms.Valerie Cerra and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-11-16 with Business & Economics categories.

All types of recessions, on average, not just those associated with financial and political crises (as in Cerra and Saxena, AER 2008), lead to permanent output losses. These findings have far-reaching conceptual and policy implications. A new paradigm of the business cycle needs to account for shifts in trend output and the puzzling inconsistency of output dynamics with other cyclical components of production. The ‘output gap’ can be ill-conceived, poorly measured, and inconsistent over time. Persistent losses require more buffers and crisis-avoidance policies, affecting tradeoffs in prudential, macroeconomic, and reserve management policies. The frequency and depth of crises are key determinants of long-term growth and drive a new stylized model of economic development.

A Decade After The Global Recession

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Author : M. Ayhan Kose
language : en
Publisher: World Bank Publications
Release Date : 2021-03-19

A Decade After The Global Recession written by M. Ayhan Kose and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-19 with Business & Economics categories.

This year marks the tenth anniversary of the 2009 global recession. Most emerging market and developing economies weathered the global recession relatively well, in part by using the sizable fiscal and monetary policy ammunition accumulated during prior years of strong growth. However, their growth prospects have weakened since then, and many now have less policy space. This study provides the first comprehensive stocktaking of the past decade from the perspective of emerging market and developing economies. Many of these economies have now become more vulnerable to economic shocks. The study discusses lessons from the global recession and policy options for these economies to strengthen growth and prepare for the possibility of another global downturn.

Estimating Potential Output With A Multivariate Filter

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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 2010-12-01

Estimating Potential Output With A Multivariate Filter written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010-12-01 with Business & Economics categories.

This paper develops a simple model for measuring potential output that uses data on inflation, unemployment, and capacity utilization. We apply the model to 10 countries, in addition to the United States and the euro area. While there is a substantial amount of uncertainty around our estimates, we find that the financial crisis has resulted in a reduction in potential output.

Ascent After Decline

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Author : Otaviano Canuto
language : en
Publisher: World Bank Publications
Release Date : 2012-01-09

Ascent After Decline written by Otaviano Canuto and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012-01-09 with Business & Economics categories.

The Great Recession of 2009-2011 has left us short of instruments, bereft of confidence, and generally unprepared for a low-growth world. In this book, more than a dozen noted scholars discuss the prospects for future regrowth within analyses of key policy problems, major markets, and promising avenues for stimulating long-term economic growth.

Output Gap Uncertainty And Real Time Monetary Policy

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Author : Francesco Grigoli
language : en
Publisher: International Monetary Fund
Release Date : 2015-01-23

Output Gap Uncertainty And Real Time Monetary Policy written by Francesco Grigoli and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-01-23 with Business & Economics categories.

Output gap estimates are subject to a wide range of uncertainty owing to data revisions and the difficulty in distinguishing between cycle and trend in real time. This is important given the central role in monetary policy of assessments of economic activity relative to capacity. We show that country desks tend to overestimate economic slack, especially during recessions, and that uncertainty in initial output gap estimates persists several years. Only a small share of output gap revisions is predictable ex ante based on characteristics like output dynamics, data quality, and policy frameworks. We also show that for a group of Latin American inflation targeters the prescriptions from typical monetary policy rules are subject to large changes due to output gap revisions. These revisions explain a sizable proportion of the deviation of inflation from target, suggesting this information is not accounted for in real-time policy decisions.

What Happens During Recessions Crunches And Busts

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Author : Mr.Ayhan Kose
language : en
Publisher: International Monetary Fund
Release Date : 2008-12-01

What Happens During Recessions Crunches And Busts written by Mr.Ayhan Kose and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008-12-01 with Business & Economics categories.

We provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles for 21 OECD countries over the period 1960–2007. In particular, we analyze the implications of 122 recessions, 112 (28) credit contraction (crunch) episodes, 114 (28) episodes of house price declines (busts), 234 (58) episodes of equity price declines (busts) and their various overlaps in these countries over the sample period. Our results indicate that interactions between macroeconomic and financial variables can play major roles in determining the severity and duration of recessions. Specifically, we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions. JEL Classification Numbers: E32; E44; E51; F42