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What Caused the Great Recession in the Eurozone?

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  • Robert L. Hetzel

Abstract

Since 2008, the Eurozone has undergone two recessions, which together constitute the \"Great Recession.\" The combination of a decline in output and disinflation as well as a persistent decline in inflation suggests that contractionary monetary policy was one factor. This paper makes two methodological points. First, in analyzing the causes of the Great Recession, it is important to distinguish between credit and monetary policy. Second, a multiplicity of estimated models can \"explain\" the Great Recession. In practice, economists choose between models through an associated narrative that adds additional information about causation.

Suggested Citation

  • Robert L. Hetzel, 2016. "What Caused the Great Recession in the Eurozone?," Working Paper 16-10, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:16-10
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    References listed on IDEAS

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    Cited by:

    1. David Beckworth, 2017. "The monetary policy origins of the eurozone crisis," International Finance, Wiley Blackwell, vol. 20(2), pages 114-134, June.
    2. Hetzel, Robert L., 2017. "A proposal to clarify the objectives and strategy of monetary policy," Journal of Macroeconomics, Elsevier, vol. 54(PA), pages 72-89.

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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