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dc.contributor.authorCross, Rod
dc.contributor.authorMcNamara, H.
dc.contributor.authorPokrovskii, A.V.
dc.description.abstractThis paper reviews the evidence on the effects of recessions on potential output. In contrast to the assumption in mainstream macroeconomic models that economic fluctuations do not change potential output paths, the evidence is that they do in the case of recessions. A model is proposed to explain this phenomenon, based on an analogy with water flows in porous media. Because of the discrete adjustments made by heterogeneous economic agents in such a world, potential output displays hysteresis with regard to aggregate demand shocks, and thus retains a memory of the shocks associated with recessions.en_US
dc.publisherUniversity of Strathclydeen_US
dc.publisherUniversity College Corken_US
dc.relation.ispartofseriesSIRE DISCUSSION PAPERS;SIRE-DP-2010-40
dc.subjectPermanent Effectsen_US
dc.subjectHydraulic Keynesianismen_US
dc.subjectPorous Mediaen_US
dc.titleMemory of Recessionsen_US
dc.typeWorking Paperen_US

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