TY  - JOUR
AU  - Romer,Christina D.
AU  - Romer,David H.
TI  - What Ends Recessions?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4765
PY  - 1994
Y2  - December 1994
UR  - http://www.nber.org/papers/w4765
L1  - http://www.nber.org/papers/w4765.pdf
N1  - Author contact info:
Christina D. Romer
Department of Economics
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/642-4317
Fax: 510/642-6615
E-Mail: cromer@econ.berkeley.edu

David H. Romer
Department of Economics
University of California, Berkeley
Berkeley, CA 94720-3880
E-Mail: dromer@econ.berkeley.edu
M1  - published as Christina D. Romer, David H. Romer. "What Ends Recessions?," in Stanley Fischer and Julio J. Rotemberg, eds., "NBER Macroeconomics Annual 1994, Volume 9" MIT Press (1994)

M2  - featured in NBER digest on 1994-08-01
AB  - This paper analyzes the contributions of monetary and fiscal policy to postwar economic recoveries.  We find that the Federal Reserve typically responds to downturns with prompt and large reductions in interest rates.  Discretionary fiscal policy, in contrast, rarely reacts before the trough in economic activity, and even then the responses are usually small.  Simulations using multipliers from both simple regressions and a large macroeconomic model show that the interest rate falls account for nearly all of the above-average growth that occurs early in recoveries.  Our estimates also indicate that on several occasions expansionary policies have contributed substantially to above-normal growth outside of recoveries.  Finally, the results suggest that the persistence of aggregate output movements is largely the result of the extreme persistence of the contribution of policy changes.
ER  -