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How to Explain the Persistence of the Great Recession? A Balanced Stability Approach

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  • Teodoro Dario Togati

    () (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)

Abstract

The Great Recession (GR) brings about a stalemate in macroeconomics. On the one hand, while describing the immediate effects of the GR, standard models fail to account for its persistence. On the other, heterodox approaches do not regain consensus as they fail to devise an alternative method for capturing the deep causes of the GR that account for its persistence in a systematic way. This paper fills this gap by proposing a new framework called Balanced Stability Approach. Unlike standard macro which takes stability for granted, it provides a balanced assessment of stability, considering both threats and opportunities for phenomena such as the so-called New Economy (NE) on a par. On these grounds, the paper draws the conclusion that the persistence of the GR is due to a low level of aggregate demand rooted in the structural changes generated by the NE.

Suggested Citation

  • Teodoro Dario Togati, 2012. "How to Explain the Persistence of the Great Recession? A Balanced Stability Approach," Working papers 014, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
  • Handle: RePEc:tur:wpapnw:014
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    File URL: http://www.biblioecon.unito.it/biblioservizi/RePEc/tur/wpapnw/m14.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Economic Crisis; Stability; Deductivist Methods; Macroeconomics; Keynesianism;

    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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