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Memory of recessions

descriptionPublicationkeyboard_double_arrow_right Article , Preprint 01 Apr 2012Publisher:Informa UK LimitedJournal:Journal of Post Keynesian Economics, volume 34, pages 413-430 (issn: 0160-3477,

Authors: Rod Cross; Hugh McNamara; Alexei Pokrovskii;

doi: 10.2753/pke0160-3477340302

Memory of recessions

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Abstract

This paper reviews the evidence on the effects of recessions on potential output. In contrast to the assumption in mainstream macroeconomic models that economic fluctuations do not change potential output paths, the evidence is that they do in the case of recessions. A model is proposed to explain this phenomenon based on an analogy with water flows in porous media. Because of the discrete adjustments made by heterogeneous economic agents in such a world, potential output displays hysteresis with regard to aggregate demand shocks and thus retains a memory of the shocks associated with recessions.

Related Organizations

University College Cork
Ireland
University of Strathclyde
United Kingdom
University of Oxford
United Kingdom
University of Oxford
United Kingdom

Keywords

Recessions, Permanent Effects, Hydraulic Keynesianism, Porous Media, Hysteresis., jel: jel:E32, jel: jel:A12, jel: jel:E12

Impact byBIP!

	citations This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).	15
	popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.	Top 10%
	influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).	Top 10%
	impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.	Top 10%