Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record

46 Pages Posted: 18 Jun 2012

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Joseph G. Haubrich

Federal Reserve Bank of Cleveland

Multiple version iconThere are 3 versions of this paper

Date Written: June 18, 2012

Abstract

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.

Keywords: E32, E44, E52, N11, N12

JEL Classification: Recessions, Recoveries, Business Cycles, Financial Crises

Suggested Citation

Bordo, Michael D. and Haubrich, Joseph G., Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record (June 18, 2012). FRB of Cleveland Working Paper No. 12-14. Available at SSRN: https://ssrn.com/abstract=2086935 or http://dx.doi.org/10.2139/ssrn.2086935

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joseph G. Haubrich (Contact Author)

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States
216-579-2802 (Phone)
216-579-3050 (Fax)

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