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Countercyclical policy and the speed of recovery after recessions

Author

Listed:
  • Francis, Neville

    (University of North Carolina)

  • Jackson, Laura E.

    (Bentley University)

  • Owyang, Michael T.

    ()

Abstract

We consider the effect of some policies intended to shorten recessions and accelerate recoveries. Our innovation is to analyze the duration of the recoveries of various U.S. states, which gives us a cross-section of both state- and national-level policies. Because we study multiple recessions for the same state and multiple states for the same recession, we can control for differences in the economic conditions preceding recessions and the causes of the recessions when evaluating various policies. We find that expansionary monetary policy at the national level helps to stimulate the exit of individual states from recession. We find that exogenous measures of decreases in taxes or targeted increases in federal spending reduce recovery times for state-recessions. We also find ambient economic conditions can extend expected recovery times: other states in the same region suffering from recession around the same time, the length of the preceding recession, and increases in oil prices.

Suggested Citation

  • Francis, Neville & Jackson, Laura E. & Owyang, Michael T., 2013. "Countercyclical policy and the speed of recovery after recessions," Working Papers 2013-032, Federal Reserve Bank of St. Louis, revised 02 Jan 2017.
  • Handle: RePEc:fip:fedlwp:2013-032
    DOI: 10.20955/wp.2013.032
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    File URL: http://dx.doi.org/10.20955/wp.2013.032
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    References listed on IDEAS

    as
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    Cited by:

    1. Di Caro, Paolo, 2014. "Regional recessions and recoveries in theory and practice: a resilience-based overview," MPRA Paper 60300, University Library of Munich, Germany.

    More about this item

    Keywords

    business cycles; survival analysis; variable selection;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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