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Recessions and recoveries

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  • Nathan S. Balke
  • Mark A. Wynne

Abstract

The U.S. recession that began in July 1990 may have ended in April or May 1991. The pace of the subsequent recovery has been so sluggish as to be indistinguishable, in the eyes of many, from continued recession. One explanation for the sluggish pace of the recovery is that the recession itself was not particularly severe, at least when compared with others. ; In this article, Mark Wynne and Nathan Balke use monthly data on industrial production to examine the hypothesis that the severity of a recession determines the pace of the subsequent recovery. They show that, historically, the relationship between growth in the first twelve months of a recovery and the decline in industrial activity from peak to trough is statistically significant. However, there is no relationship between the length of a recession and the strength of the recovery. Consistent with their finding of a bounce-back effect for industrial production, the recovery from the 1990-91 recession is the weakest in the period covered by the Federal Reserve Board's industrial production index, just as the decline in industrial production over the course of that recession is the mildest on record.

Suggested Citation

  • Nathan S. Balke & Mark A. Wynne, 1993. "Recessions and recoveries," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Jan, pages 1-17.
    • Handle: RePEc:fip:fedder:y:1993:i:jan:p:1-17
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    References listed on IDEAS

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    Cited by:

    1. Michael D. Bordo & Joseph G. Haubrich, 2017. "Deep Recessions, Fast Recoveries, And Financial Crises: Evidence From The American Record," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 527-541, January.
    2. Francois, P. & Lloyd-Ellis, H., 2001. "Animal Spirits Meets Creative Destruction," Discussion Paper 2001-36, Tilburg University, Center for Economic Research.
    3. Evan F. Koenig, 1996. "Capacity utilization as a real-time predictor of manufacturing output," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q III, pages 16-23.
    4. Patrick Francois & Huw Lloyd-Ellis, 2003. "Animal Spirits Through Creative Destruction," American Economic Review, American Economic Association, vol. 93(3), pages 530-550, June.
    5. Hong, Kiseok & Tang, Hsiao Chink, 2012. "Crises in Asia: Recovery and policy responses," Journal of Asian Economics, Elsevier, vol. 23(6), pages 654-668.
    6. Gregory W. Huffman, 1994. "A primer on the nature of business cycles," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q I, pages 27-41.

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    Keywords

    Production (Economic theory); Recessions;

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