How to Explain the Persistence of the Great Recession? A Balanced Stability Approach
AbstractThe Great Recession (GR) brings about a stalemate in macroeconomics. On the one hand, while describing the immediate effects of the GR, standard models fail to account for its persistence. On the other, heterodox approaches do not regain consensus as they fail to devise an alternative method for capturing the deep causes of the GR that account for its persistence in a systematic way. This paper fills this gap by proposing a new framework called Balanced Stability Approach. Unlike standard macro which takes stability for granted, it provides a balanced assessment of stability, considering both threats and opportunities for phenomena such as the so-called New Economy (NE) on a par. On these grounds, the paper draws the conclusion that the persistence of the GR is due to a low level of aggregate demand rooted in the structural changes generated by the NE.
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Bibliographic InfoPaper provided by Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino in its series Working papers with number 014.
Length: 25 pages
Date of creation: Oct 2012
Date of revision:
Economic Crisis; Stability; Deductivist Methods; Macroeconomics; Keynesianism;
Find related papers by JEL classification:
- B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
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