NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Deep Recessions, Fast Recoveries, and Financial Crises: Evidence from the American Record

Michael D. Bordo, Joseph G. Haubrich

NBER Working Paper No. 18194
Issued in June 2012
NBER Program(s):   DAE   ME

Do steep recoveries follow deep recessions? Does it matter if a credit crunch or banking panic accompanies the recession? Moreover does it matter if the recession is associated with a housing bust? We look at the American historical experience in an attempt to answer these questions. The answers depend on the definition of a financial crisis and on how much of the recovery is considered. But in general recessions associated with financial crises are generally followed by rapid recoveries. We find three exceptions to this pattern: the recovery from the Great Contraction in the 1930s; the recovery after the recession of the early 1990s and the present recovery. The present recovery is strikingly more tepid than the 1990s. One factor we consider that may explain some of the slowness of this recovery is the moribund nature of residential investment, a variable that is usually a key predictor of recessions and recoveries.

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Document Object Identifier (DOI): 10.3386/w18194

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