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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. 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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  1. 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

  2. Key Points • Similarities between Great Recession and Europe in the 1980s • Differences in recent recessions • Economic shocks/policy factors

  3. 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

  4. The Great Recession and the 1980s Recessions

  5. 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

  6. Differences in recent Recessions • Long term unemployment has risen greatly. • Slow rate of Convergence. • Disability claims have gone up.

  7. Scaled Unemployment Patterns across U.S. Recessions

  8. 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.

  9. 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.

  10. 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.

  11. 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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