How Can Recessions Be Brought to an End? Effects of Macroeconomic Policy Actions on Durations of Recessions

Economic Research Forum Working Paper No. 615

21 Pages Posted: 3 Sep 2011 Last revised: 5 Sep 2011

See all articles by Bedri Kamil Onur Tas

Bedri Kamil Onur Tas

TOBB University of Economics and Technology - Department of Economics; Economic Research Forum (ERF)

Date Written: August 1, 2011

Abstract

This paper analyzes how effective macroeconomic policy actions are in ending recessions. We also investigate which structural factors help the country to get out of recessions, in other words experience shorter recessions. We implement survival regression analysis and conclude that expansionary monetary policy significantly decreases durations of recessions whereas fixing the exchange rate does not have an effect on the durations of recessions. Expansionary fiscal policy has undesired effects and decreases the probability that recession will end; in other words, increases the durations of recessions. The analysis of country specific factors indicates that emerging countries experience shorter recessions. Recessions in countries with higher trade openness last significantly longer. Financial openness and institutional quality do not have significant effects of recession durations. The empirical analysis takes into account alternative probability distributions and endogeneity of monetary policy actions.

Keywords: Recession, Macroeconomic Policy, Duration Analysis

JEL Classification: E32, E52, E62

Suggested Citation

Tas, Bedri Kamil Onur, How Can Recessions Be Brought to an End? Effects of Macroeconomic Policy Actions on Durations of Recessions (August 1, 2011). Economic Research Forum Working Paper No. 615, Available at SSRN: https://ssrn.com/abstract=1921671 or http://dx.doi.org/10.2139/ssrn.1921671

Bedri Kamil Onur Tas (Contact Author)

TOBB University of Economics and Technology - Department of Economics ( email )

Sogutozu Cad. No:43 Sogutozu
Ankara, 06560
Turkey

HOME PAGE: http://onurtas.weebly.com

Economic Research Forum (ERF) ( email )

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