Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record
Michael D. Bordo
Harvard University - Department of Economics; National Bureau of Economic Research (NBER)
Joseph G. Haubrich
Federal Reserve Bank of Cleveland
June 18, 2012
FRB of Cleveland Working Paper No. 12-14
Do steep recoveries follow deep recessions? Does it matter if a credit crunch or banking panic accompanies the recession? Moreover, does it matter if the recession is associated with a housing bust? We look at the American historical experience in an attempt to answer these questions. The answers depend on the definition of a financial crisis and on how much of the recovery is considered. But in general recessions associated with financial crises are generally followed by rapid recoveries. We find three exceptions to this pattern: the recovery from the Great Contraction in the 1930s; the recovery after the recession of the early 1990s and the present recovery. The present recovery is strikingly more tepid than the 1990s. One factor we consider that may explain some of the slowness of this recovery is the moribund nature of residential investment, a variable that is usually a key predictor of recessions and recoveries.
Number of Pages in PDF File: 46
Keywords: E32, E44, E52, N11, N12
JEL Classification: Recessions, Recoveries, Business Cycles, Financial Crisesworking papers series
Date posted: June 18, 2012
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