HKS Affiliated Authors
Professor of Public Policy, HKS; Harold Hitchings Burbank Professor of Political Economy, FAS
Excerpt
Excerpt
The business cycle is alive and well. James Stock, January 3, 2019, Paper, "Have the dynamic relations among macro variables changed markedly since the financial crisis? A dynamic factor model provides consistent evidence of stability across 248 variables The Great Moderation appears to be ongoing; you cannot reject the hypothesis that the standard deviation of four-quarter GDP growth is the same over 1984–2007 and over 2008–2018. Even so, the apparent slower GDP growth trend implies a substantial probability that a recession may start in the next 2 years, even not adding the risk that some large unprecedented negative event may occur. Because of low interest rates and already-large deficits, the ability of Congress and the Fed to mitigate the effects of a recession are historically constrained." Link