The CEPR Business Cycle Dating Committee recently concluded that there is not yet enough evidence to call a business cycle trough in the Eurozone. Instead, the committee has announced a 'prolonged pause' in the recession. This Vox Talk discusses the possible directions that this situation could lead to and questions whether the Great Recession has harmed the Eurozone’s long-term growth prospects to the extent that meagre growth could become the 'new normal'.
The simplest business cycle dating algorithm declares recessions over after two consecutive quarters of positive GDP growth. By that metric, the Eurozone recession has been over since 2013Q1. This column argues that growth and improvements in the labour market have been so anaemic that it is too early to call the end of the Eurozone recession. Indeed, if this is what an expansion looks like, then the state of the Eurozone economy might be even worse than economists feared.
The CEPR Business Cycle Dating Committee met on 11 June 2014 to determine whether the Eurozone is out of the recession that started after 2011Q3. The duty of the Committee – comprised of Philippe Weil (Chair), Domenico Giannone, Refet Gürkaynak, Monika Merz, Richard Portes, Lucrezia Reichlin, Albrecht Ritschl, Barbara Rossi, and Karl Whelan – is to date peaks and troughs of the Eurozone business cycle, marking recessions and expansions – a role similar to that of the NBER Business Cycle Dating Committee in the US.
Green shoots and double dips: Leave the words and use your statistics
Máximo Camacho, Gabriel Pérez-Quirós, Pilar Poncela03 April 2012
This column develops an early warning system to capture the trembling of the Eurozone economy before anyone else notices it, as seismologists do with earthquakes. It shows that the latest forecast suggests reductions in recession probabilities and that the crisis resolution mechanism could be behind this increase in confidence. Therefore, it seems that the Eurozone faced a short-lived double-dip recession.
The combination of tight credit conditions and fiscal-austerity measures that occurred in 2010 and 2011 put significant downward pressures on Eurozone GDP growth. Since the summer of 2011, the media started to talk about the possibility that the Eurozone could enter into a double-dip recession. Only a few months before the analysts were all looking for ‘green shoots’. According to Google trends, the term ‘green shoots’ reached a peak in the searches in the week of 10 May 2009, while the term ‘double-dip’ reached its peak in the week of 7 August 2011.