How to Explain the Persistence of the Great Recession? A Balanced Stability Approach

Teodoro Dario Togati (togati@econ.unito.it)
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Teodoro Dario Togati: Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy

No 14, Working papers from Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino

Abstract: The Great Recession (GR) brings about a stalemate in macroeconomics. On the one hand, while describing the immediate effects of the GR, standard models fail to account for its persistence. On the other, heterodox approaches do not regain consensus as they fail to devise an alternative method for capturing the deep causes of the GR that account for its persistence in a systematic way. This paper fills this gap by proposing a new framework called Balanced Stability Approach. Unlike standard macro which takes stability for granted, it provides a balanced assessment of stability, considering both threats and opportunities for phenomena such as the so-called New Economy (NE) on a par. On these grounds, the paper draws the conclusion that the persistence of the GR is due to a low level of aggregate demand rooted in the structural changes generated by the NE.

Keywords: Economic Crisis; Stability; Deductivist Methods; Macroeconomics; Keynesianism (search for similar items in EconPapers)
JEL-codes: B50 E32 E60 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2012-10
New Economics Papers: this item is included in nep-pke
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