- The Relatively Mild U.S. Financial Recession
- Why Wasn't the Risk of a Housing Price Decline Taken Into Account?
- Job Market Churning is Slowing
- Same Income, Varying Taxes
The Great Recession has been brutally deep, and the aftereffects seem likely to persist for at least five years after it officially ended in June 2009 (by the dating of the National Bureau of Economic Research). But in the context of financial recessions in other countries, the U.S. experience actually doesn't look so bad. Here's a table comparing the behavior of real GDP across 14 recessions associated with financial crises. The average peak-to-trough decline is a drop of 10.2%; in the U.S., the decline was 5.1%. The average length of these recessions was 6.6 quarters; in the U.S., peak-to-trough was 6 quarters.
Sometimes people talk about the depth of the Great Recession as if it really couldn't have been any worse--as if the very depth of the recession and the sustained proves that macroeconomic policy to counter the recession was necessarily ineffective. The conclusion does not necessarily follow, of course. To me, these comparisons offer some (admittedly impressionistic) evidence that the monetary policy steps taken by the federal government--the huge budget deficits on the fiscal side, along with the near-zero federal funds interest rates and quantitative easing on the monetary side--did have beneficial effects. The Great Recession and its aftermath have been gruesome, but without the aggressive fiscal and monetary policy response, it could have been even worse.