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Characterizing the Unusual Path of U.S. Output During and After the Great Recession

Author

Listed:
  • Lecznar, Jonathan

    (Federal Reserve Bank of Richmond)

  • Sharp, Robert

    (Federal Reserve Bank of Richmond)

  • Sarte, Pierre-Daniel G.

    (Federal Reserve Bank of Richmond)

Abstract

In this article, we examine the extent to which U.S. per capita gross domestic product (GDP) growth has been uncharacteristically slow in the recovery from the 2007--09 recession and investigate whether this tepid growth might be a short- or longer-term phenomenon. We first examine several conventional univariate time series representations of per capita GDP and use these to assess the most recent recession and recovery in relation to its previous behavior over the U.S. postwar period. We then present a decomposition of per capita GDP into three components---each of which tends to fluctuate at different frequencies from the others---and find that the substantial decline in the labor force participation rate during and after the Great Recession played a key role in the unusually large fall and slow recovery of per capita GDP. Since the labor force participation rate moves slowly over time, one might expect per capita GDP to continue to recover at a considerably slower pace than what has been observed after other postwar recessions.

Suggested Citation

  • Lecznar, Jonathan & Sharp, Robert & Sarte, Pierre-Daniel G., 2013. "Characterizing the Unusual Path of U.S. Output During and After the Great Recession," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 163-192.
  • Handle: RePEc:fip:fedreq:00004
    as

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    File URL: http://www.richmondfed.org/publications/research/economic_quarterly/2013/q3/pdf/sarte.pdf
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    References listed on IDEAS

    as
    1. Kudlyak, Marianna, 2013. "A Cohort Model of Labor Force Participation," Economic Quarterly, Federal Reserve Bank of Richmond, issue 1Q, pages 25-43.
    2. Ulrich Mueller & Mark W. Watson, 2013. "Measuring Uncertainty about Long-Run Prediction," NBER Working Papers 18870, National Bureau of Economic Research, Inc.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "Recovery from Financial Crises: Evidence from 100 Episodes," American Economic Review, American Economic Association, vol. 104(5), pages 50-55, May.
    4. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    5. Blough, Stephen R, 1992. "The Relationship between Power and Level for Generic Unit Root Tests in Finite Samples," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(3), pages 295-308, July-Sept.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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