Economic Fluctuations Seminar – 26 Nov p.stankov

Outline of the talk The impact of the Great Recession on firms – a case study of the pornography industry Is the Great Recession Over?

The impact of the Great Recession on firms Read the handout from The Economist: “The trouble with pornography” Answer the following: – What are the key pieces of information for managerial decision makers in this industry? – Why are these important for decision making? – Are there missing facts?

Recessions and unemployment

slide 5 Question for Discussion: Come up with a policy or policies to try to reduce the natural rate of unemployment. Note whether your policy targets frictional or structural unemployment.

Is the Great Recession Over? Farmer 2009 Farmer 2009 criteria: monthly year-on-year rate of growth of the stock market changed direction an average of 4.4 months before the end of recessions Unemployment growth turns direction around the end of the recession date

Stock markets growth, unemployment growth and recessions Source: Farmer 2009 articleFarmer 2009

The current situation: Visit bls.gov For more

Unemployment and unemployment growth in the previous two US recessions Source: Farmer 2009 articleFarmer 2009

Where are the next (still hidden) bad news? Government debt – inflation – high interest rates spiral Commercial banks “addicted” to cheap credit from central banks Recovery only temporary when government withdraws from pushing up aggregate demand