Was This Recession Different? Are They All Different?

Charles L. Schultze and

CLS

Charles L. Schultze Former Brookings Expert

George L. Perry

George L. Perry Senior Fellow Emeritus - Economic Studies

Discussants: Benjamin M. Friedman and

BMF

Benjamin M. Friedman Harvard University

James Tobin

JT

James Tobin

THE RECENT RECESSION and disappointing recovery have renewed interest
in the cyclical behavior of the economy. The latest recession was
the eighth in the last forty years. Each has involved massive job losses
and sharply reduced rates of capital formation. Each has also reduced
the inflation rate, although not always for long. The leading candidates
for explaining these episodes are variations in fiscal and monetary policies,
shocks to the economy from exogenous developments apart from
policy, the internal dynamics of the economy, and combinations of some
or all of these factors.
In this paper we attempt to answer a number of questions about the
recent recession and its predecessors. Are recessions generically special
in the sense that economic relations are different in some systematic
way? If they are different from nonrecession periods, what are the family
resemblances among recessions and in what ways have they differed
from each other? In particular, how was the latest recession different
from others, either in how economic activity unfolded and reacted to
policy, in how policy changed in reaction to economic developments,
in what brought on the recession, or in what made the initial stages of
recovery so weak? Have financial developments played a special role in
the latest recession and the weak recovery from it? How potent are fiscal
and monetary policies around recessions, how much of the variations in
output do they explain, and how much is left to be explained by shocks?