IDEAS home Printed from https://ideas.repec.org/p/tur/wpapnw/014.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    • Handle: RePEc:tur:wpapnw:014
    as

    Download full text from publisher

    File URL: http://www.bemservizi.unito.it/repec/tur/wpapnw/m14.pdf
    File Function: First version, 2012
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ricardo J. Caballero, 2010. "Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 85-102, Fall.
    2. anonymous, 2010. "Interview with Thomas Sargent," The Region, Federal Reserve Bank of Minneapolis, vol. 24(Sep), pages 26-39.
    3. Robert E. Lucas, Jr., 2004. "Keynote Address to the 2003 HOPE Conference: My Keynesian Education," History of Political Economy, Duke University Press, vol. 36(5), pages 12-24, Supplemen.
    4. Philip Arestis & Rogério Sobreira & José Luis Oreiro (ed.), 2011. "An Assessment of the Global Impact of the Financial Crisis," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-30691-2, May.
    5. Tony Lawson, 2012. "Ontology and the study of social reality: emergence, organisation, community, power, social relations, corporations, artefacts and money," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 36(2), pages 345-385.
    6. Sheila C. Dow, 2011. "Cognition, market sentiment and financial instability," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(2), pages 233-249.
    7. Carlota Perez, 2009. "The double bubble at the turn of the century: technological roots and structural implications," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 779-805, July.
    8. Sheila C Dow, 2012. "Different Approaches to the Financial Crisis," Economic Thought, World Economics Association, vol. 1(1), pages 1-4, July.
    9. Teodoro Dario Togati, 2001. "Keynes as the Einstein of Economic Theory," History of Political Economy, Duke University Press, vol. 33(1), pages 117-138, Spring.
    10. James Crotty, 2009. "Structural causes of the global financial crisis: a critical assessment of the 'new financial architecture'," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 563-580, July.
    11. Michael Woodford, 2010. "Financial Intermediation and Macroeconomic Analysis," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 21-44, Fall.
    12. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h469j4ua7 is not listed on IDEAS
    13. Alessandro Vercelli, 2009. "Minsky Moments, Russell Chickens, and Gray Swans--The Methodological Puzzles of the Financial Instability Analysis," Economics Working Paper Archive wp_582, Levy Economics Institute.
    14. Tony Lawson, 2009. "The current economic crisis: its nature and the course of academic economics," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 759-777, July.
    15. Robert E. Hall, 2010. "Why Does the Economy Fall to Pieces after a Financial Crisis?," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 3-20, Fall.
    16. Lucas, Robert E., 1977. "Understanding business cycles," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 7-29, January.
    17. Philip Arestis & Rogério Sobreira & José Luis Oreiro (ed.), 2011. "The Financial Crisis," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-30394-2, May.
    18. repec:hal:wpspec:info:hdl:2441/5l6uh8ogmqildh09h469j4ua7 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    2. Stijn Claessens & M. Ayhan Kose, 2017. "Asset prices and macroeconomic outcomes: A survey," CAMA Working Papers 2017-76, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    3. repec:rza:wpaper:255 is not listed on IDEAS
    4. Claessens, Stijn & Kose, M. Ayhan & Terrones, Marco E., 2012. "How do business and financial cycles interact?," Journal of International Economics, Elsevier, vol. 87(1), pages 178-190.
    5. Ben R. Martin, 2016. "Twenty challenges for innovation studies," Science and Public Policy, Oxford University Press, vol. 43(3), pages 432-450.
    6. Peter J. Boettke & Alexander W. Salter & Daniel J. Smith, 2018. "Money as meta-rule: Buchanan’s constitutional economics as a foundation for monetary stability," Public Choice, Springer, vol. 176(3), pages 529-555, September.
    7. André Moreira Cunha & Daniela Magalhães Prates & Fernando FerrariFilho, 2011. "Brazil Responses to the International Financial Crisis: A Successful Example of Keynesian Policies?," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(5), pages 693-714, December.
    8. Phil Faulkner & Stephen Pratten & Jochen Runde, 2017. "Cambridge Social Ontology: Clarification, Development and Deployment," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 41(5), pages 1265-1277.
    9. Nuno Ornelas Martins, 2018. "Justice and the Social Ontology of the Corporation," Journal of Business Ethics, Springer, vol. 153(1), pages 17-28, November.
    10. Sarte, Pierre-Daniel & Schwartzman, Felipe & Lubik, Thomas A., 2015. "What inventory behavior tells us about how business cycles have changed," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 264-283.
    11. Elias Dinopoulos & Wolf-Heimo Grieben & Fuat Sener, 2012. "The Conundrum of Recovery Policies: Growth or Jobs?," Working Paper Series of the Department of Economics, University of Konstanz 2012-03, Department of Economics, University of Konstanz.
    12. Pedro Garcia Duarte, 2011. "Recent Developments in Macroeconomics: The DSGE Approach to Business Cycles in Perspective," Chapters, in: John B. Davis & D. Wade Hands (ed.), The Elgar Companion to Recent Economic Methodology, chapter 16, Edward Elgar Publishing.
    13. Giancarlo Bertocco, 2011. "Finance and risk: does finance create risk?," Economics and Quantitative Methods qf1115, Department of Economics, University of Insubria.
    14. Konstantin Makrelov & Channing Arndt & Rob Davies & Laurence Harris, 2018. "Stock-and-flow-consistent macroeconomic model for South Africa," WIDER Working Paper Series 007, World Institute for Development Economic Research (UNU-WIDER).
    15. Peter Docherty & Ron Bird & Timo Henckel & Gordon Menzies, 2016. "Australian prudential regulation before and after the global financial crisis," CAMA Working Papers 2016-49, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    16. Muriel Dal-Pont Legrand & Martina Cioni & Eugenio Petrovich & Alberto Baccini, 2022. "Is there cross-fertilization in macroeconomics? . Version 2," Working Papers halshs-03741035, HAL.
    17. Gkanoutas-Leventis, Angelos & Nesvetailova, Anastasia, 2015. "Financialisation, oil and the Great Recession," Energy Policy, Elsevier, vol. 86(C), pages 891-902.
    18. Francesco Sergi, 2015. "L'histoire (faussement) naïve des modèles DSGE," Documents de travail du Centre d'Economie de la Sorbonne 15066, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    19. Eugenio Caverzasi & Alberto Russo, 2018. "Toward a new microfounded macroeconomics in the wake of the crisis," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 27(6), pages 999-1014.
    20. Konstantin Makrelov & Channing Arndt & Rob Davies & Laurence Harris, 2018. "Stock-and-flow-consistent macroeconomic model for South Africa," WIDER Working Paper Series wp-2018-7, World Institute for Development Economic Research (UNU-WIDER).
    21. Detzer, Daniel, 2019. "Financialization made in Germany: A review," IPE Working Papers 122/2019, Berlin School of Economics and Law, Institute for International Political Economy (IPE).

    More about this item

    Keywords

    Economic Crisis; Stability; Deductivist Methods; Macroeconomics; Keynesianism;
    All these keywords.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tur:wpapnw:014. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Daniele Pennesi (email available below). General contact details of provider: https://edirc.repec.org/data/dstorit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.