THEORETICAL FRAMEWORK OF THE GREAT RECESSION in US (2008-2015Q2) (Comparison With Great Depression)

Leyla Baştav

No 9299, EcoMod2016 from EcoMod

Abstract: The paper analyses the dynamics of the major macroeconomic aggregates of the US economy through the recession following 2008 financial crises up until 2015 theoretically in an IS-LM and AS-AD framework.The paper also compares and contrasts the Great Recession with the Great Depression of 1929 within the theoretical framework. DSGE modelling framework explained with the Keynesian framework of IS-LM. Role of expectations on demand side spending, nominal and real wage rigidities thus leading to sticky inflation, (typical price stickiness), also role of monetary policy (demand management) pushing the economy out of recession and stagflation are discussed. The economy has been pulled out of recession and broken the vicious cycle of stagflation and thus depression with expansionary monetary policies. Still the economy needs fine tuning since the growth performance may be fragile in the coming terms.

Keywords: USA; General equilibrium modeling (CGE); Business cycles (search for similar items in EconPapers)
Date: 2016-07-04
New Economics Papers: this item is included in nep-dge and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:ekd:009007:9299

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