Investment Bubbles and Jobless Slow-Growth Expansions: A Tale of Three Recoveries

26 Pages Posted: 6 Apr 2013

See all articles by John Golob

John Golob

Federal Reserve Bank of Kansas City (Retired)

Date Written: April 5, 2013

Abstract

In most U.S. post-war business cycles, recessions were followed by above trend growth in output and employment. After the last three recessions, however, output and employment growth were sluggish. Economists focusing on employment have described these recoveries as “jobless.” This paper shows that each of the last three recessions coincided with a collapsing bubble in a category of private fixed investment: commercial real estate (1990-91), internet equipment (2001), and housing (2008-09). No previous recessions coincided with similar reallocations of investment spending. The paper provides evidence of the unique pattern of investment spending during the last three business cycles, and discusses how the collapse of investment bubbles can restrain economic recoveries. Since investment bubbles can deflate during financial crises, they help explain the sub-par economic performance that often accompanies these crises.

Keywords: Investment, Bubbles, Business Cycles, Jobless Recoveries

JEL Classification: E22, E24, E32

Suggested Citation

Golob, John, Investment Bubbles and Jobless Slow-Growth Expansions: A Tale of Three Recoveries (April 5, 2013). Available at SSRN: https://ssrn.com/abstract=2245620 or http://dx.doi.org/10.2139/ssrn.2245620

John Golob (Contact Author)

Federal Reserve Bank of Kansas City (Retired) ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

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