Discussion Paper

Developing a Narrative: the Great Recession and Its Aftermath

Abstract: The severe recession experienced by the U.S. economy between December 2007 and June 2009 has given way to a disappointing recovery. It took three and a half years for GDP to return to its pre-recession peak, and by most accounts this broad measure of economic activity remains below trend today. What precipitated the U.S. economy into the worst recession since the Great Depression? And what headwinds are holding back the recovery? Are these headwinds permanent, calling for a revision of our assessment of the economy?s speed limit? Or are they transitory, although very long-lasting, as the historical record on the persistent damages inflicted by financial crisis seems to suggest? In this post, we address these questions through the lens of the FRBNY DSGE model.

Keywords: Slow Recovery; DSGE; Great Recession; Headwinds; Historical Decomposition;

JEL Classification: E2;

Bibliographic Information

Provider: Federal Reserve Bank of New York

Part of Series: Liberty Street Economics

Publication Date: 2014-09-24

Number: 20140924