DEEP RECESSIONS,FAST RECOVERIES,AND FINANCIAL CRISES: EVIDENCE FROM THE AMERICAN RECORD

Do steep recoveries follow deep recessions? Does it matter if a credit crunch or banking panic accompanies the recession? We look at the American historical experience in an attempt to answer these questions. The answers depend on the definition of a financial crisis and on how much of the recovery is considered. But in general recessions associated with financial crises are followed by rapid recoveries. We find three exceptions to this pattern: the recovery from the Great Contraction in the 1930s, the recovery after the recession of the early 1990s, and the present recovery. The present recovery is strikingly more tepid than the 1990s. Possible factors to explain the slowness of this recovery include residential investment and policy uncertainty. (JEL E32, N10, G01)