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Working Paper
Recession Shapes of Regional Evolution: Factors of Hysteresis
This paper empirically investigates sources of hysteresis, focusing on downward nominal wage rigidity and the gender gap in the labor market, using U.S. state-level payroll employment data. Employing a Bayesian Markov-switching model of business cycles, we identify U-shaped and L-shaped recessions, which correspond to quick recoveries and hysteresis, respectively. Both U-shaped and L-shaped recessions are driven by supply and demand shocks; however, U-shaped recessions are associated with recessionary shocks that raise labor productivity, whereas L-shaped recessions are also driven by shocks ...
Discussion Paper
Assessing Recession Risks with State-Level Data
This note evaluates recession risks at the national and state levels using a state-of-the-art Bayesian Markov-switching model that distinguishes between full-recovery recessions (U-shaped recessions) and those that generate lasting damage, or hysteresis (L-shaped recessions). While states exhibit considerable heterogeneity in their business-cycle experiences, most saw some degree of hysteresis in the past recessions that occurred prior to the COVID pandemic. By contrast, the model classifies the pandemic-induced recession as a full-recovery episode with a low likelihood of hysteresis, ...