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Amerisclerosis? The Puzzle of Rising U.S. Unemployment Persistence. Written By: Olivier Coibion, Yuriy Gorodnichenko, Dmitri Koustas Presented By: Drew Geissbuhler, Charles Meixelsperger, Jeffrey Zorr. Key Points. Similarities between Great Recession and Europe in the 1980s

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Amerisclerosis? The Puzzle of Rising U.S. Unemployment Persistence

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Amerisclerosis the puzzle of rising u s unemployment persistence

Amerisclerosis? The Puzzle of Rising U.S. Unemployment Persistence

Written By: Olivier Coibion, Yuriy Gorodnichenko, Dmitri Koustas

Presented By: Drew Geissbuhler, Charles Meixelsperger, Jeffrey Zorr


Key points

Key Points

  • Similarities between Great Recession and Europe in the 1980s

  • Differences in recent recessions

  • Economic shocks/policy factors


Background information

Background Information

  • Early 1980s US and Western Europe both experience recessions

  • Western Europe had a prolonged recession compared to the U.S

  • 1990, 2001, and 2007 recessions all experienced persistent unemployment


The great recession and the 1980s recessions

The Great Recession and the 1980s Recessions


Similarities between 1980 western europe recession and u s now

Similarities Between 1980 Western Europe Recession and U.S. now

  • People were unwilling to move for jobs

  • Cultural Morals were low in 1980 Europe.

  • Average age of unemployed getting older


Differences in recent recessions

Differences in recent Recessions

  • Long term unemployment has risen greatly.

  • Slow rate of Convergence.

  • Disability claims have gone up.


Scaled unemployment patterns across u s recessions

Scaled Unemployment Patterns across U.S. Recessions


Economic shocks

Economic Shocks

  • Account for initial rise in unemployment.

  • Many shocks in sequence can account for extended unemployment.

  • Not the case for recent post 1990 persistence.


Policy changes

Policy Changes

Pre 1990

  • Small change in budget balance and government deficit.

  • The policies of Pre 1990 Recessions are less Contractionary.

    Post 1990

  • Both 2001 and 2007 recessions show a large change in deficit.

  • If policy makers would have chosen similar actions to pre-1990 Unemployment would have recovered faster.

  • More Contractionary.


Conclusion

Conclusion

  • U.S. economy has shown a slow recovery.

  • Post WWII and pre 1990 showed very quick recovery from the recession.

  • The authors disprove many factors believed to have great effect on unemployment persistence.

  • Implementation of new monetary and fiscal policies that adjust to new information help hasten unemployment recovery.


Conclusion continued

Conclusion (continued)

  • Great Recession and future U.S. downturns are likely to last longer than those of the past so fiscal policy must adjust accordingly.

  • Fiscal policies should target longer-lived projects that focus on the long run rather than short run investments like more recent policies.


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