{
  "title": "Hysteresis and Business Cycles",
  "publication": "IMF Working Papers, May 29, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2020/05/29/hysteresis-and-business-cycles-49265",
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  "summary": "Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles.",
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    {
      "heading": "Summary and motivation",
      "content": "- Traditionally, economic growth and business cycles have been treated independently.\n- Hysteresis: dependence of GDP levels on its history of shocks argues for unifying the analysis of growth and cycles.\n- Renewed interest in hysteresis has been sparked by:\n  - the persistence of the Global Financial Crisis, and\n  - fears of a slow recovery from the Covid-19 crisis."
    },
    {
      "heading": "Findings and conceptual implications",
      "content": "- Recent empirical and theoretical literature reviewed in the paper motivate a paradigm shift linking growth and cycles.\n- The findings have far-reaching conceptual implications: temporary shocks can produce persistent effects on GDP levels (hysteresis).\n- Specific channels and topics discussed in the literature include:\n  - Business cycles\n  - Financial crises\n  - Labor markets\n  - Technology\n  - Unemployment\n  - Fiscal policy\n  - Learning by doing\n  - Liquidity trap\n  - Physical capital"
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- In recessions:\n  - Monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn.\n- In expansions:\n  - Running a high-pressure economy could have permanent positive effects.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2020/05/29/hysteresis-and-business-cycles-49265"
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    "Authors: Valerie Cerra, A. Fatas, Sweta Chaman Saxena",
    "Published: May 29, 2020",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513536996.001",
    "Traditionally, economic growth and business cycles have been treated independently.",
    "Hysteresis: dependence of GDP levels on its history of shocks argues for unifying the analysis of growth and cycles.",
    "Renewed interest in hysteresis has been sparked by:",
    "Recent empirical and theoretical literature reviewed in the paper motivate a paradigm shift linking growth and cycles.",
    "The findings have far-reaching conceptual implications: temporary shocks can produce persistent effects on GDP levels (hysteresis).",
    "Specific channels and topics discussed in the literature include:",
    "In recessions:",
    "In expansions:",
    "**Working Paper**"
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