Memory of recessions
This paper reviews the evidence on the effects of recessions on potential output. In contrast to the assumption in mainstream macroeconomic models that economic fluctuations do not change potential output paths, the evidence is that they do in the case of recessions. A model is proposed to explain t...
| Hoofdauteurs: | , , , |
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| Formaat: | Journal article |
| Gepubliceerd in: |
2012
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| _version_ | 1826267632575184896 |
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| author | Cross, R McNamara, H Kalachev, L Pokrovski, A |
| author_facet | Cross, R McNamara, H Kalachev, L Pokrovski, A |
| author_sort | Cross, R |
| collection | OXFORD |
| description | This paper reviews the evidence on the effects of recessions on potential output. In contrast to the assumption in mainstream macroeconomic models that economic fluctuations do not change potential output paths, the evidence is that they do in the case of recessions. A model is proposed to explain this phenomenon based on an analogy with water flows in porous media. Because of the discrete adjustments made by heterogeneous economic agents in such a world, potential output displays hysteresis with regard to aggregate demand shocks and thus retains a memory of the shocks associated with recessions. |
| first_indexed | 2024-03-06T20:57:10Z |
| format | Journal article |
| id | oxford-uuid:39a77e07-464e-4018-8c79-c852d7d190e0 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T20:57:10Z |
| publishDate | 2012 |
| record_format | dspace |
| spelling | oxford-uuid:39a77e07-464e-4018-8c79-c852d7d190e02022-03-26T13:56:50ZMemory of recessionsJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:39a77e07-464e-4018-8c79-c852d7d190e0Mathematical Institute - ePrints2012Cross, RMcNamara, HKalachev, LPokrovski, AThis paper reviews the evidence on the effects of recessions on potential output. In contrast to the assumption in mainstream macroeconomic models that economic fluctuations do not change potential output paths, the evidence is that they do in the case of recessions. A model is proposed to explain this phenomenon based on an analogy with water flows in porous media. Because of the discrete adjustments made by heterogeneous economic agents in such a world, potential output displays hysteresis with regard to aggregate demand shocks and thus retains a memory of the shocks associated with recessions. |
| spellingShingle | Cross, R McNamara, H Kalachev, L Pokrovski, A Memory of recessions |
| title | Memory of recessions |
| title_full | Memory of recessions |
| title_fullStr | Memory of recessions |
| title_full_unstemmed | Memory of recessions |
| title_short | Memory of recessions |
| title_sort | memory of recessions |
| work_keys_str_mv | AT crossr memoryofrecessions AT mcnamarah memoryofrecessions AT kalachevl memoryofrecessions AT pokrovskia memoryofrecessions |