Paul Beaudry, Dana Galizia, Franck Portier, Sunday, June 1, 2014 - 00:00

Hayek viewed recessions as working out excessive investments; Keynes viewed them as demand shortages. This column argues that they may not be as mutually exclusive as many think. Recessions may reflect periods of liquidation but this may be associated with inefficient adjustment involving unemployment and precautionary savings. Stimulative policy may be desirable even if it delays the full recovery.

CEPR Policy Research