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Sorry, U.S. Recoveries Really Aren’t Different

Authors: Carmen M. Reinhart, Research Associate, National Bureau of Economic Research; and Vincent Reinhart, Resident Scholar, American Enterprise Institute, and Kenneth S. Rogoff, Professor of Economics and Thomas D. Cabot Professor of Public Policy, Harvard University
October 15, 2012

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Bloomberg argues that the recent spate of opinions suggesting that international comparisons cannot be made to the U.S. financial recovery are misguided.

Five years after the onset of the 2007 subprime financial crisis, U.S. gross domestic product per capita remains below its initial level. Unemployment, though down from its peak, is still about 8 percent. Rather than the V-shaped recovery that is typical of most postwar recessions, this one has exhibited slow and halting growth.

This disappointing performance shouldn't be surprising. We have presented evidence that recessions associated with systemic banking crises tend to be deep and protracted and that this pattern is evident across both history and countries. Subsequent academic research using different approaches and samples has found similar results.

Recently, however, a few op-ed writers have argued that, in fact, the U.S. is "different" and that international comparisons aren't relevant because of profound institutional differences from one country to another. Some of these authors, includingKevin Hassett, Glenn Hubbard and John Taylor -- who are advisers to the Republican presidential nominee, Mitt Romney -- as well as Michael Bordo, who supports the candidate, have stressed that the U.S. is also "different" in that its recoveries from recessions associated with financial crises have been rapid and strong. Their interpretation is at least partly based on a 2012 study by Bordo and Joseph Haubrich, which examines the issue for the U.S. since 1880.

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