American Economic Review: Vol. 104 No. 5 (May 2014)

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The Role of Policy in the Great Recession and the Weak Recovery

Article Citation

Taylor, John B. 2014. "The Role of Policy in the Great Recession and the Weak Recovery." American Economic Review, 104(5): 61-66.

DOI: 10.1257/aer.104.5.61

Abstract

This paper reports on recent research showing that the severe recession of 2007-2009 and the weak recovery have been due to poor economic policies and the failure to implement good policies during the past decade. Monetary policy, fiscal policy, and regulatory policy became more discretionary, more interventionist, and less predictable in comparison with the previous two decades of better economic performance. At best these policies led to growth spurts, but were followed by retrenchments, averaging to poor performance. The paper also considers alternative views-that the equilibrium interest rate declined during the decade and that the seriousness of financial crisis caused the slow recovery.

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Authors

Taylor, John B. (Stanford U)

JEL Classifications

E32: Business Fluctuations; Cycles
E43: Interest Rates: Determination, Term Structure, and Effects
E44: Financial Markets and the Macroeconomy
E52: Monetary Policy
E62: Fiscal Policy
G01: Financial Crises
L51: Economics of Regulation


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