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The Deeper the Recession, the Stronger the Recovery: Is It Really That Simple?

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  • Azhar Iqbal
  • Mark Vitner

Abstract

Are deep recessions typically followed by strong recoveries? This paper investigates this question. There is not a single standard definition for a deep recession or a strong recovery. Therefore, our first step is to define what constitutes a deep recession and a strong recovery. Next we examine whether there is any causal relationship between deep recessions and strong recoveries. Our analysis shows there is no relationship between the depth of a recession and the subsequent pace of economic recovery when we use Gross Domestic Product, Gross Domestic Income, and employment as measures of recession and recovery. A modestly significant relationship does exist, however, between the magnitude of increases in the unemployment rate during a recession and decreases in the unemployment rate during the ensuing recovery.

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  • Azhar Iqbal & Mark Vitner, 2011. "The Deeper the Recession, the Stronger the Recovery: Is It Really That Simple?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 46(1), pages 22-31, January.
    • Handle: RePEc:pal:buseco:v:46:y:2011:i:1:p:22-31
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