There is some evidence to suggest that, after recession has reached a certain size or duration, recovery is then harder and more sluggish. Keynes’ animal spirits become depressed. But it takes an awful lot to depress them for more than a couple of years. Capitalism seems to be a pretty resilient beast.
Global recessions are now approaching one-year in duration.
Animal spirits rarely stay down for long
“In the US, the consensus among forecasters is that growth at or near trend will not resume until the second half of 2010 and that the 2008 second-quarter peak level will not be regained until the first half of 2011.
Since the late 19th century, there have been 255 recessions in western economies. Of these, 164 have lasted just one year and only 32 have lasted for more than two years. In other words, two-thirds of recessions last a single year, and only one in eight lasts more than two years.
An analysis of recessions shows that those lasting one year or less typically end more abruptly. The average growth rate in the year after such a recession was 3.5 per cent, and in the subsequent year 3.8 per cent. This is compatible with the view that short recessions are essentially inventory cycles. Once inventories are reduced to satisfactory levels, normal production levels resume, and fixed capital investment expenditures postponed during the recession are carried out.
The caveat to all this is that the current circumstances, the current recession, are unusual. But so was the Great Depression.”
Source: FT, Finanical Times, July 31, 2009
http://www.ft.com/cms/s/0/5768b08a-7ad7-11de-8c34-00144feabdc0.html?nclick_check=1
Saverio Manzo
No comments:
Post a Comment