The Historical Performance of the Federal Reserve by Bordo Michael D.;

Author:Bordo, Michael D.;
Language: eng
Format: epub
Tags: Federal Reserve, central bank, Great Recession, Taylor Rule, inflation, money, credit crisis, banking, monetary policy, interest rates
Publisher: Independent Publishers Group
Published: 2019-06-02T00:00:00+00:00

Another approach is to relate the amplitude not to changes over the NBER contraction, but over the cycle phases for money, credit and stock prices that the Harding–Pagan algorithm identifies. Claessens, Kose and Terrones compare the depth of recessions with large and small credit crunches. With fewer recessions, we take a more multivariate approach, and regress recession amplitude against cycle amplitude for the risk spread, the money measure (either quantity or short-term interest rate) and the stock price. For example, if a recession begins (e.g., a peak occurs) when the money supply is in a contraction phase, we associate the amplitude of the NBER recession with the amplitude of that monetary contraction (which will rarely have the same turning points or duration). Tables 7.10 and 7.11 report the results for the nineteenth and twentieth centuries. The results are broadly similar to those in the NBER focused regression of Tables 7.9 and 7.10, but there are some differences. The coefficient on the risk spread shows up as positive in the twentieth century. Few coefficients are significant in the twentieth century, except when the risk-spread–money–growth interaction is included. TFP growth tends to be negatively associated with recessions.

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