Thursday, September 17, 2009

Stretched V or U? The shape of the last three recessions.

Here is a nice chart from John Fernald at the San Francisco Fed that shows the path of GDP after the last three recessions, including the current one. Using the NBER dates to set the beginning of the recession you can see that the first quarters of the current one were similar to those of the previous two but that a year into the recession the economy accelerated its decline. This made the current recession much longer and deeper than the previous two.

Looking at the forecast for the next 6 quarters, the pace of recovery is not that different from what we have seen before but we start at a much lower level and this makes GPD to remain below the path of the 1990 and 2001 recessions for the quarters (and years) ahead.

Antonio Fatás