Monday, June 29, 2020

Governments should do everything possible to avoid recessions – yet they don’t — Bill Mitchell

In May 2020, the IMF published a new Working Paper (No 20/73) – Hysteresis and Business Cycles – which provides some insights into what happens during an economic cycle. The IMF are somewhat late to the party as they usually are. We have known about the concept and relevance of hysteresis since the 1980s. In terms of the academic work, I was one of the earliest contributors to the hysteresis literature in the world. I published several articles on the topic in the 1980s that came out of my PhD research as I was searching for solutions to the dominant view in the profession that the Phillips curve constraint prevented full employment from being sustained (the inflation impacts!). The lesson from this literature in part – especially in current times – is that governments should do everything possible to avoid recessions. The hysteresis notion tells us clearly that the future is path dependent. The longer and deeper the recession, the more damaging the consequences and the longer it takes to recover while enduring these elevated levels of misery. Organisations like the IMF have never embraced that sort of reasoning, until now it seems. They certainly didn’t act in this way during the Greek disaster. But, better late than never....
Bill Mitchell – billy blog
Governments should do everything possible to avoid recessions – yet they don’t
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

7 comments:

Peter Pan said...

Trump should do everything to avoid a recession (if only not to lose to Biden) - yet he doesn't know how.

Matt Franko said...

Somebody tell Bill there is a global viral pandemic and everything is shut down to prevent pathogen transfers....

Peter Pan said...

Is it still shut down where you live, Matt?

Matt Franko said...

Yeah everything is running at about 50% ....

Matt Franko said...

TSA numbers:

https://www.tsa.gov/coronavirus/passenger-throughput

Golf tee times every 15 minutes instead of 8..

No church...

Pools closed.... outdoor dining only at restaurants.... offices still shut and work from home..... telemedicine....

Peter Pan said...

Better brace yourself for a Biden presidency, Matt...

S400 said...

So “everything” equals 50 percent in Matt’s science trained head.