How the Great Moderation Became a (Contained) Depression and What to Do About It
AbstractThe Great Recession was deep and the subsequent recovery has been slower than most economists predicted. This article summarizes the message of a recent book that presents perspectives from a group of Keynesian economists who warned prior to 2007 of dangerous trends that could lead to these unfavorable outcomes. We discuss how the debt-fueled consumer boom leading up to the Great Recession was unsustainable and how rising inequality has compromised demand generation during the feeble recovery. We conclude the article by considering how public policy must respond in coming years.
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Bibliographic InfoPaper provided by Trinity College, Department of Economics in its series Working Papers with number 1303.
Length: 12 pages
Date of creation: Feb 2013
Date of revision:
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Web page: http://www.trincoll.edu/Academics/MajorsAndMinors/Economics/Pages/default.aspx
More information through EDIRC
Great Recession; Great Moderation; economic recovery; Keynesian macroeconomics;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-02 (All new papers)
- NEP-HPE-2013-03-02 (History & Philosophy of Economics)
- NEP-MAC-2013-03-02 (Macroeconomics)
- NEP-PKE-2013-03-02 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jordi Galí & Luca Gambetti, 2006.
"On the sources of the Great Moderation,"
Economics Working Papers
1041, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2007.
- Luca Gambetti & Jordi Galí, 2007. "On the sources of the Great Moderation," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
- Luca Gambetti & Jordi Gal�, 2009. "On the Sources of the Great Moderation," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 26-57, January.
- Palley, Thomas I., 2009. "America's exhausted paradigm: Macroeconomic causes of the financial crisis and great recession," IPE Working Papers 02/2009, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
- Mark Setterfield, 2013. "Using Interest Rates as the Instrument of Monetary Policy: Beware Real effects, Positive Feedbacks, and Discontinuities," Working Papers 1320, Trinity College, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Setterfield).
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