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http://ssrn.com/abstract=226985
 
 

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What Ends Recessions?


Christina D. Romer


University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

David H. Romer


University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

June 1994

NBER Working Paper No. w4765

Abstract:     
This paper analyzes the contributions of monetary and fiscal policy to postwar economic recoveries. We find that the Federal Reserve typically responds to downturns with prompt and large reductions in interest rates. Discretionary fiscal policy, in contrast, rarely reacts before the trough in economic activity, and even then the responses are usually small. Simulations using multipliers from both simple regressions and a large macroeconomic model show that the interest rate falls account for nearly all of the above-average growth that occurs early in recoveries. Our estimates also indicate that on several occasions expansionary policies have contributed substantially to above-normal growth outside of recoveries. Finally, the results suggest that the persistence of aggregate output movements is largely the result of the extreme persistence of the contribution of policy changes.

Number of Pages in PDF File: 74

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Date posted: June 10, 2000  

Suggested Citation

Romer, Christina D. and Romer, David H., What Ends Recessions? (June 1994). NBER Working Paper No. w4765. Available at SSRN: http://ssrn.com/abstract=226985

Contact Information

Christina D. Romer (Contact Author)
University of California, Berkeley - Department of Economics ( email )
549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-4317 (Phone)
510-642-6615 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
David H. Romer
University of California, Berkeley - Department of Economics ( email )
549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-0822 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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