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The Economic Impact of Recession Announcements

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  • Eggers, Andrew
  • Ellison, Martin
  • Lee, Sang Seok

Abstract

The convention in the news media is to announce a recession if a country experiences two consecutive quarters of negative growth. We exploit the arbitrary threshold implied by this practice to identify the economic impact of recession announcements through a Regression Discontinuity Design (RDD). Estimation results show that news of a recession leads to a discontinuous fall in consumer confidence, consumption growth and final estimates of GDP growth in a panel of countries. The effect is large, robust and statistically significant.

Suggested Citation

  • Eggers, Andrew & Ellison, Martin & Lee, Sang Seok, 2020. "The Economic Impact of Recession Announcements," CEPR Discussion Papers 15466, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:15466
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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy

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