Economics of Recession

Edited by Arturo Estrella, Professor of Economics, Rensselaer Polytechnic Institute, Troy, New York, US

‘This two-volume project contains an excellent collection of the leading articles on the economics of recessions that will be very useful to researchers in macroeconomics and students in Ph.D. programs. It is well organized with the appropriate set of topics and accompanied by a well written editorial introduction which provides provides a nice summary of the literature and puts the papers in perspective.’

• Contents:Introduction Arturo EstrellaPART IWHAT IS A RECESSION? 1. Geoffrey H. Moore (1967), ‘What is a Recession?’, American Statistician, 21 (4), October, 16–92. Allan P. Layton and Anirvan Banerji (2003), ’What is a Recession?: A Reprise’, Applied Economics, 35 (16), 1789–973. Arthur F. Burns and Wesley C. Mitchell (1946), ‘Working Plans’, in Measuring Business Cycles, Chapter 1, New York, NY, USA: National Bureau of Economic Research, 3–224. Arthur F. Burns and Wesley C. Mitchell (1946), ‘Dating Specific and Business Cycles’, in Measuring Business Cycles, Chapter 4, New York, NY, USA: National Bureau of Economic Research, 56–1145. Geoffrey H. Moore (1958), ‘Measuring Recessions’, Journal of the American Statistical Association, 53 (282), June, 259–3166. James D. Hamilton (1989), ‘A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle’, Econometrica, 57 (2), March, 357–84 7. Michael D. Boldin (1994), ‘Dating Turning Points in the Business Cycle’, Journal of Business, 67 (1), January, 97–1318. Don Harding and Adrian Pagan (2003), ‘A Comparison of Two Business Cycle Dating Methods’, Journal of Economic Dynamics and Control, 27 (9), July, 1681–909. João Victor Issler and Farshid Vahid (2006), ‘The Missing Link: Using the NBER Recession Indicator to Construct Coincident and Leading Indices of Economic Activity’, Journal of Econometrics, 132 (1), May, 281–30310. James H. Stock and Mark W. Watson (2010), ‘Indicators for Dating Business Cycles: Cross-History Selection and Comparisons’, American Economic Review: Papers and Proceedings, 100 (2), May, 16–9PART II WHAT CAUSES RECESSIONS?11. Christina D. Romer and David H. Romer (1989), ‘Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz’, in Olivier Jean Blanchard and Stanley Fischer (eds), NBER Macroeconomics Annual 1989, Cambridge, MA, USA and London, UK: MIT Press, 121–7012. Ben S. Bernanke, Mark Gertler and Mark Watson (1997), ‘Systematic Monetary Policy and the Effects of Oil Price Shocks’, Brookings Papers on Economic Activity, 1997 (1), 91–15713. Christopher A. Sims and Tao Zha (2006), ‘Does Monetary Policy Generate Recessions?’, Macroeconomic Dynamics, 10 (2), April, 231–7214. Marvin Goodfriend (2007), ‘How the World Achieved Consensus on Monetary Policy’, Journal of Economic Perspectives, 21 (4), Fall, 47–6815. Tobias Adrian and Arturo Estrella (2008), ‘Monetary Tightening Cycles and the Predictability of Economic Activity’, Economics Letters, 99 (2), May, 260–6416. Christopher Allsopp and David Vines (2005), ‘The Macroeconomic Role of Fiscal Policy’, Oxford Review of Economic Policy, 21 (4), Winter, 485–50817. Gary D. Hansen and Edward C. Prescott (1993), ‘Did Technology Shocks Cause the 1990-1991 Recession?’, American Economic Review: Papers and Proceedings, 83 (2), May, 280–8618. Giovanni Caggiano, Efrem Castelnuovo and Nicolas Groshenny (2014), ‘Uncertainty Shocks and Unemployment Dynamics in U.S. Recessions’, Journal of Monetary Economics, 67, October, 78–9219. Charlotte Christiansen (2013), ‘Predicting Severe Simultaneous Recessions Using Yield Spreads as Leading Indicators’, Journal of International Money and Finance, 32, February, 1032–43PART III HOW DO RECESSIONS END? 20. John B. Taylor (1993), ‘Discretion versus Policy Rules in Practice’, Carnegie-Rochester Conference Series on Public Policy, 39, December, 195–21421. Paul Krugman (2005), ‘Is Fiscal Policy Poised for a Comeback?’, Oxford Review of Economic Policy, 21 (4), Winter, 515–2322. Alan J. Auerbach and Yuriy Gorodnichenko (2012), ‘Measuring the Output Responses to Fiscal Policy’, American Economic Journal: Economic Policy, 4 (2), May, 1–27PART IV THE EFFECTS OF RECESSION: LABOR MARKETS 23. John Roberts (1987), ‘An Equilibrium Model with Involuntary Unemployment at Flexible, Competitive Prices and Wages’, American Economic Review, 77 (5), December, 856–7424. Kenneth Clark, Derek Leslie and Elizabeth Symons (1994), ‘The Costs of Recession’, Economic Journal, 104 (422), January, 20–3625. Truman Bewley (1999), ‘Work Motivation’, Federal Reserve Bank of St. Louis Review, 81 (3), May–June, 35–4926. Lisa B. Kahn (2010), ‘The Long-Term Labor Market Consequences of Graduating from College in a Bad Economy’, Labour Economics, 17 (2), April, 303–1627. Steven J. Davis and Till von Wachter (2011), ‘Recessions and the Costs of Job Loss’, Brookings Papers on Economic Activity, 2011 (2), Fall, 1–55Volume II Contents:Introduction An introduction to both volumes by the editor appears in Volume IPART I THE EFFECTS OF RECESSION: OTHER SYSTEMIC EFFECTS 1. Min Ouyang (2009), ‘The Scarring Effect of Recessions’, Journal of Monetary Economics, 56 (2), March, 184–992. Arturo Estrella (2004), ‘The Cyclical Behavior of Optimal Bank Capital’, Journal of Banking and Finance, 28 (6), June, 1469–983. Alessandro Beber and Michael W. Brandt (2010), ‘When it Cannot Get Better or Worse: The Asymmetric Impact of Good and Bad News on Bond Returns in Expansions and Recessions’, Review of Finance, 14 (1), January, 119–554. Kyle Bagwell and Robert W. Staiger (1997), ‘Collusion over the Business Cycle’, RAND Journal of Economics, 28 (1), Spring, 82–1065. Gadi Barlevy (2002), ‘The Sullying Effect of Recessions’, Review of Economic Studies, 69 (1), January, 65–966. Kwan Ok Lee and Gary Painter (2013), ‘What Happens to Household Formation in a Recession’, Journal of Urban Economics, 76, July, 93–1097. Elizabeth A.M. Searing (2013), ‘Love Thy Neighbor? Recessions and Interpersonal Trust in Latin America’, Journal of Economic Behavior and Organization, 94, October, 68–798. Paola Giuliano and Antonio Spilimbergo (2014), ‘Growing Up in a Recession’, Review of Economic Studies, 81 (2), April, 787–8179. Alexandra Graddy-Reed and Maryann P. Feldman (2015), ‘Stepping Up: An Empirical Analysis of the Role of Social Innovation in Response to an Economic Recession’, Cambridge Journal of Regions, Economy and Society, 8 (2), July, 293–312 10. Christopher J. Ruhm (2000), ‘Are Recessions Good for Your Health?’, Quarterly Journal of Economics, 115 (2), May, 617–50 11. Jan Boone and Jan C. van Ours (2006), ‘Are Recessions Good for Workplace Safety?’, Journal of Health Economics, 25 (6), November, 1069–9312. Melissa McInerney and Jennifer M. Mellor (2012), ‘Recessions and Seniors’ Health, Health Behaviors, and Healthcare Use: Analysis of the Medicare Current Beneficiary Survey’, Journal of Health Economics, 31 (5), September, 744–5113. Ehsan Latif (2014), ‘The Impact of Recession on Drinking and Smoking Behaviours in Canada’, Economic Modelling, 42, October, 43–56 PART II FORECASTING RECESSIONS 14. James H. Stock and Mark W. Watson (1989), ‘New Indexes of Coincident and Leading Economic Indicators’, in Olivier Jean Blanchard and Stanley Fischer (eds), NBER Macroeconomics Annual 1989, Cambridge, MA, USA and London, UK: MIT Press, 351–9415. Arturo Estrella and Gikas A. Hardouvelis (1991), ‘The Term Structure as a Predictor of Real Economic Activity’, Journal of Finance, XLVI (2), June, 555–76 16. Benjamin M. Friedman and Kenneth N. Kuttner (1993), ‘Why Does the Paper-Bill Spread Predict Real Economic Activity?’, in James H. Stock and Mark W. Watson (eds), Business Cycles, Indicators, and Forecasting: National Bureau of Economic Research, Studies in Business Cycles, Volume 28, Chapter 5, Chicago, IL, USA and London, UK: University of Chicago Press, 213–53 17. Arturo Estrella and Frederic S. Mishkin (1997), ‘The Predictive Power of the Term Structure of Interest Rates in Europe and the United States: Implications for the European Central Bank’, European Economic Review, 41 (7), July, 1375–1401 18. Arturo Estrella and Frederic S. Mishkin (1998), ‘Predicting U.S. Recessions: Financial Variables as Leading Indicators’, Review of Economics and Statistics, 80 (1), February, 45–61 19. Henri Bernard and Stefan Gerlach (1998), ‘Does the Term Structure Predict Recessions? The International Evidence’, International Journal of Finance and Economics, 3 (3), July, 195–21520. Arturo Estrella, Anthony P. Rodrigues and Sebastian Schich (2003), ‘How Stable is the Predictive Power of the Yield Curve? Evidence from Germany and the United States’, Review of Economics and Statistics, 85 (3), August, 629–4421. Arturo Estrella (2005), ‘Why Does the Yield Curve Predict Output and Inflation?’, Economic Journal, 115 (505), July, 722–44, A1–A2 22. Agustin Duarte, Ioannis A. Venetis and Ivan Paya (2005), ‘Predicting Real Growth and the Probability of Recession in the Euro Area Using the Yield Spread’, International Journal of Forecasting, 21 (2), April–June, 261–77 23. Arturo Estrella and Mary R. Trubin (2006), ‘The Yield Curve as a Leading Indicator: Some Practical Issues’, Federal Reserve Bank of New York: Current Issues in Economics and Finance, 12 (5), July/August, 1–724. Charlotte Christiansen, Jonas Nygaard Eriksen and Stig Vinther Møller (2014), ‘Forecasting US Recessions: The Role of Sentiment’, Journal of Banking and Finance, 49, December, 459–6825. John C. Bluedorn, Jörg Decressin and Marco E. Terrones (2016), ’Do Asset Price Drops Foreshadow Recessions?’, International Journal of Forecasting, 32 (2), April–June, 518–2626. Marcelle Chauvet and Simon Potter (2005), ‘Forecasting Recessions Using the Yield Curve’, Journal of Forecasting, 24 (2), March, 77–103 27. Heikki Kauppi and Pentti Saikkonen (2008), ‘Predicting U.S. Recessions with Dynamic Binary Response Models’, Review of Economics and Statistics, 90 (4), November, 777–91 28. Pär Österholm (2012), ‘The Limited Usefulness of Macroeconomic Bayesian VARs When Estimating the Probability of a US Recession’, Journal of Macroeconomics, 34 (1), March, 76–8629. Glenn D. Rudebusch and John C. Williams (2009), ‘Forecasting Recessions: The Puzzle of the Enduring Power of the Yield Curve’, Journal of Business and Economic Statistics, 27 (4), October, 492–503PART III IDENTIFYING RECESSIONS IN REAL TIME30. Marcelle Chauvet and Jeremy Piger (2008), ‘A Comparison of the Real-Time Performance of Business Cycle Dating Methods’, Journal of Business and Economic Statistics, 26 (1), January, 42–931. James D. Hamilton (2011), ‘Calling Recessions in Real Time’, International Journal of Forecasting, 27 (4), October–December, 1006–26PART IV MANAGING THE INDIVIDUAL RISKS OF RECESSION 32. James Ang and Adam Smedema (2011), ‘Financial Flexibility: Do Firms Prepare for Recession?’, Journal of Corporate Finance, 17 (3), June, 774–8733. Ricardo J. Caballero and Mohamad L. Hammour (1994), ‘The Cleansing Effect of Recessions’, American Economic Review, 84 (5), December, 1350–68Index