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World Recession: What Went Wrong?

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  • Robert L. Hetzel

Abstract

This paper starts by framing the issue of how seemingly intuitive responses to the distress suffered during recession can not only be ineffective but also can harm long‐term growth. It then goes on to discuss the most long‐lived of explanations of cyclical instability, the explanation based on swings in the psychology of financial markets. Such explanations offer no framework for thinking about the price system and the role of the interest rate. Based on a discussion of the role of the interest rate in smoothing cyclical fluctuations, the paper offers a critique of current policy.

Suggested Citation

  • Robert L. Hetzel, 2009. "World Recession: What Went Wrong?," Economic Affairs, Wiley Blackwell, vol. 29(3), pages 17-21, September.
    • Handle: RePEc:bla:ecaffa:v:29:y:2009:i:3:p:17-21
    DOI: 10.1111/j.1468-0270.2009.01913.x
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    References listed on IDEAS

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    1. Robert J. Gordon, 1986. "The American Business Cycle: Continuity and Change," NBER Books, National Bureau of Economic Research, Inc, number gord86-1, March.
    2. Hetzel,Robert L., 2008. "The Monetary Policy of the Federal Reserve," Cambridge Books, Cambridge University Press, number 9780521881326.
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    Cited by:

    1. Steve Ambler, 2016. "Putting Money to Work: Monetary Policy in a Low Interest Rate Environment," e-briefs 249, C.D. Howe Institute.
    2. Robert L. Hetzel, 2009. "Monetary policy in the 2008-2009 recession," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 95(Spr), pages 201-233.

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