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What caused the 1990-1991 recession?

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  • Carl E. Walsh

Abstract

This article decomposes U.S. GDP into components associated with major macroeconomic disturbances in order to identify the likely causes of the 1990 recession. Four types of disturbances--aggregate supply, aggregate spending, money demand and money supply--are identified in the empirical analysis. The results suggest the general slowing of the economy relative to trend prior to the actual downturn was due to restrictive monetary policy. Aggregate spending factors turned contractionary in mid-1990, however, and accounted for most of the subsequent decline in GDP during the rest of 1990.

Suggested Citation

  • Carl E. Walsh, 1993. "What caused the 1990-1991 recession?," Economic Review, Federal Reserve Bank of San Francisco, pages 33-48.
  • Handle: RePEc:fip:fedfer:y:1993:p:33-48:n:2
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    File URL: http://www.frbsf.org/publications/economics/review/1993/93-2_34-48.pdf
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    References listed on IDEAS

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    3. Adrian W. Throop, 1991. "Consumer sentiment and the economic downturn," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue mar1.
    4. Miller, Stephen M, 1991. "Monetary Dynamics: An Application of Cointegration and Error-Correction Modeling," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(2), pages 139-154, May.
    5. Robert G. King, 1991. "Money and business cycles," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
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    8. King, Robert G. & Plosser, Charles I. & Stock, James H. & Watson, Mark W., 1991. "Stochastic Trends and Economic Fluctuations," American Economic Review, American Economic Association, vol. 81(4), pages 819-840, September.
    9. Blanchard, Olivier Jean, 1989. "A Traditional Interpretation of Macroeconomic Fluctuations," American Economic Review, American Economic Association, vol. 79(5), pages 1146-1164, December.
    10. Matthew Shapiro & Mark Watson, 1988. "Sources of Business Cycles Fluctuations," NBER Chapters,in: NBER Macroeconomics Annual 1988, Volume 3, pages 111-156 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Sachverständigenrat zur Begutachtung der Gesamtwirtschaftlichen Entwicklung (ed.), 2009. "Deutschland im internationalen Konjunkturzusammenhang. Expertise im Auftrag der Bundesregierung," Occasional Reports / Expertisen, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, number 75372.
    2. Freeman, Alan, 2016. "The Whole of the Storm: Money, debt and crisis in the current Long Depression," MPRA Paper 84394, University Library of Munich, Germany.
    3. repec:eee:intfin:v:48:y:2017:i:c:p:99-116 is not listed on IDEAS
    4. Menzie D. Chinn & Michael P. Dooley, 1997. "Monetary Policy in Japan, Germany and the United States: Does One Size Fit All?," NBER Working Papers 6092, National Bureau of Economic Research, Inc.

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