A tale of the two recessions 2008 and 2020: What do the Taylor rule, the Phillips curve and Okun's law tell?

Knut L. Seip and Dan Zhang

Journal of Policy Modeling, 2025, vol. 47, issue 3, 681-701

Abstract: The study compares the recessions in 2008 and the recession in 2020 using the Taylor rule, Okun’s law and the Phillips curve. We propose measures to forecast recessions and guide policy responses to mitigate their impact: i) Sharp “spikes” in the 21-month moving average of Okun’s law and Phillips curve variables indicate that shifts in their lead-lag relations could serve as early warning signals for impending recessions; ii) A more balanced increase in monetary supply could potentially shorten recession durations without accelerating inflation during the post-recession recovery; iii) deviations from the Taylor rule did not worsen the economy.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:47:y:2025:i:3:p:681-701

DOI: 10.1016/j.jpolmod.2025.02.001

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