Economic Fluctuations Seminar – 26 Nov. 2009 p.stankov
Outline of the talk • The impact of the Great Recession on firms – a case study of the pornography industry • Is the Great Recession Over?
The impact of the Great Recession on firms • Read the handout from The Economist: “The trouble with pornography” • Answer the following: • What are the key pieces of information for managerial decision makers in this industry? • Why are these important for decision making? • Are there missing facts?
Question for Discussion: • Come up with a policy or policies to try to reduce the natural rate of unemployment. • Note whether your policy targets frictional or structural unemployment.
Is the Great Recession Over? • Farmer 2009 criteria: • monthly year-on-year rate of growth of the stock market changed direction an average of 4.4 months before the end of recessions • Unemployment growth turns direction around the end of the recession date
Stock markets growth, unemployment growth and recessions Source: Farmer 2009 article
The current situation: Visit bls.gov For more
Unemployment and unemployment growth in the previous two US recessions Source: Farmer 2009 article
Where are the next (still hidden) bad news? • Government debt – inflation – high interest rates spiral • Commercial banks “addicted” to cheap credit from central banks • Recovery only temporary when government withdraws from pushing up aggregate demand