The National Bureau of Economic Research (NBER) is the organization that essentially confirms if the United States is in a recession.
It refrained from doing so last year when the U.S. experienced a technical recession — back-to-back quarters of negative economic growth — because the labor market was so strong.
But when the GDP hits negative again, will the NBER declare the country is in an economic downturn?
Perhaps it is setting the nation up for one with this paper, titled “Does Monetary Policy Matter? The Narrative Approach after 35 Years.”
Here is the abstract:
“The narrative approach to macroeconomic identification uses qualitative sources, such as newspapers or government records, to provide information that can help establish causal relationships. This paper discusses the requirements for rigorous narrative analysis using fresh research on the impact of monetary policy as the focal application. We read the historical minutes and transcripts of Federal Reserve policymaking meetings to identify significant contractionary and expansionary changes in monetary policy not taken in response to current or prospective developments in real activity for the period 1946 to 2016. We find that such monetary shocks have large and significant effects on unemployment, output, and inflation in the expected directions. Analysis of available policy records suggests that a contractionary monetary shock likely occurred in 2022. Based on the empirical estimates of the effect of previous shocks, one would expect substantial negative impacts on real GDP and inflation in 2023 and 2024.”
Put simply, expect a recession in 2023 or 2024.
Leave a Comment