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Slow Recoveries: A Structural Interpretation

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  • Jordi Galí
  • Frank Smets
  • Rafael Wouters

Abstract

An analysis of the performance of GDP, employment and other labor market variables following the troughs in postwar U.S. business cycles points to much slower recoveries in the three most recent episodes, but does not reveal any significant change over time in the relation between GDP and employment. This leads us to characterize the last three episodes as slow recoveries, as opposed to jobless recoveries. We use the estimated New Keynesian model in Galí-Smets-Wouters (2011) to provide a structural interpretation for the slower recoveries since the early nineties.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 630.

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Date of creation: May 2012
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Handle: RePEc:bge:wpaper:630

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Keywords: jobless recoveries; U.S. business cycle; estimated DSGE models; Okun's law;

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  1. Nir Jaimovich & Sergio Rebelo, 2006. "Can News About the Future Drive the Business Cycle?," 2006 Meeting Papers, Society for Economic Dynamics 31, Society for Economic Dynamics.
  2. Lawrence J. Christiano & Mathias Trabandt & Karl Walentin, 2010. "Involuntary Unemployment and the Business Cycle," NBER Working Papers 15801, National Bureau of Economic Research, Inc.
  3. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2008. "New Keynesian models: not yet useful for policy analysis," Staff Report, Federal Reserve Bank of Minneapolis 409, Federal Reserve Bank of Minneapolis.
  4. Smets, Frank & Wouters, Rafael, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6112, C.E.P.R. Discussion Papers.
  5. Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999, Society for Computational Economics 1151, Society for Computational Economics.
  6. Lawrence J. Christiano & Martin S. Eichenbaum & Mathias Trabandt, 2013. "Unemployment and business cycles," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 1089, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
  1. Sacht, Stephen, 2014. "Optimal monetary policy responses and welfare analysis within the highfrequency New-Keynesian framework," Economics Working Papers, Christian-Albrechts-University of Kiel, Department of Economics 2014-03, Christian-Albrechts-University of Kiel, Department of Economics.
  2. Sandra Gomes & Nikolay Iskrev & Caterina Mendicino, 2013. "Monetary policy shocks: We got news!," Working Papers, Banco de Portugal, Economics and Research Department w201307, Banco de Portugal, Economics and Research Department.
  3. John Fernald, 2014. "Productivity and Potential Output Before, During, and After the Great Recession," NBER Working Papers 20248, National Bureau of Economic Research, Inc.
  4. Sala, Luca & Söderström, Ulf & Trigari, Antonella, 2012. "Structural and Cyclical Forces in the Labor Market During the Great Recession: Cross-Country Evidence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9167, C.E.P.R. Discussion Papers.
  5. Albinowski, Maciej & Ciżkowicz, Piotr & Rzońca, Andrzej, 2013. "Distrust in the ECB – product of failed crisis prevention or of inappropriate cure?," MPRA Paper 48242, University Library of Munich, Germany.
  6. Christopher L. Foote & Richard W. Ryan, 2012. "Labor-market polarization over the business cycle," Public Policy Discussion Paper, Federal Reserve Bank of Boston 12-8, Federal Reserve Bank of Boston.
  7. Michael D. Bordo & Joseph G. Haubrich, 2012. "Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record," NBER Working Papers 18194, National Bureau of Economic Research, Inc.
  8. Prieto, Esteban & Eickmeier, Sandra & Marcellino, Massimiliano, 2013. "Time variation in macro-financial linkages," Discussion Papers, Deutsche Bundesbank, Research Centre 13/2013, Deutsche Bundesbank, Research Centre.
  9. Rebecca Craigie & David Gillmore & Nicolas Groshenny, 2012. "Not a jobless recovery, just a slow one," Reserve Bank of New Zealand Analytical Notes series, Reserve Bank of New Zealand AN2012/06, Reserve Bank of New Zealand.
  10. Francesco Zanetti & Haroon Mumtaz, 2013. "The Effect of Labor and Financial Frictions on Aggregate Fluctuations," Economics Series Working Papers, University of Oxford, Department of Economics 690, University of Oxford, Department of Economics.
  11. repec:van:wpaper:vuecon-sub-14-00004 is not listed on IDEAS
  12. Xavier Gabaix & David Laibson & Deyuan Li & Hongyi Li & Sidney Resnick & Casper G. de Vries, 2013. "The Impact of Competition on Prices with Numerous Firms," Working Papers, Chapman University, Economic Science Institute 13-07, Chapman University, Economic Science Institute.

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