The Economics of Recession: A Survey
Part 10/10, November 2022 [1]
Arturo Estrella

10. Concluding remarks

          The concept of recession, if not the terminology and its exact definition, may be traced well back into the nineteenth century. However, it was not until early in the twentieth century that the pace of research activity in this area started to intensify, largely through the efforts of Wesley Clair Mitchell and his collaborators. Researchers at the NBER have continued to follow in their footsteps since then, providing continuity as well as investigating new methods that could improve our knowledge of recessions. Another intensification of the pace of research came in the late 1980s, initially with a focus on forecasting but later expanding into many specialized subtopics. As we now survey the 8 questions posed in this introduction, we may not always have definitive answers, but research achievements have led to a higher level of understanding, cut through some of the earlier misperceptions, and produced results of genuine practical value.

          Nevertheless, the work is far from done, even with regard to some of the basics. Can the definition of recession be made more transparent while retaining the fundamental guiding principles of the NBER approach and avoiding hopelessly simplistic methods? Can economists worldwide achieve consensus on methods of business cycle dating so that uniformly-defined dates can be set for each industrial economy? Many of the articles in the collection show that some empirical relationships have been robust across recessions while others have not. Can economic theory explain these differences?

          In the end, should economic researchers pay more attention to the economics of recession? Recessions in the United States account for under 15 percent of the time elapsed since the 1950s, but that does not imply that economists should only be interested in recessions less than 15 percent of the time. Better understanding of recessions could reduce that proportion even more, or could perhaps lead to the conclusion that recessions are necessary for Schumpeterian or for monetary policy reasons.

          In terms of modeling and conceptual understanding, we could try to distinguish more effectively between the common features of all recessions and the particular characteristics of each. Recessions do not repeat themselves but, as Mark Twain might have said, they sometimes almost rhyme. Many of the present readings find statistical regularities associated with all recessions. Others examine particular recessions, including the “Great Recession” of 2008-09, on which more work is still underway. In this connection, a topic of great potential interest is the role of financial markets and institutions in recessions. Some of our readings have considered aspects of this issue, but it seems to be an area of research where much more can be done.