Are the high-growth recovery periods over?


We present evidence about the loss of the so-called "plucking effect", that is, a high-growth phase of the cycle typically observed at the end of recessions. This result matches the popular belief, presented informally by different authors, that the current recession will have permanent effects, or that the current recession will have an L shape versus the old-time recessions that have always had a V shape. Furthermore, we show that the loss of the "plucking effect" can explain part of the Great Moderation. We postulate that these two phenomena may be due to changes in inventory management brought about by improvements in information and communications technologies.

Published as: High Growth Recoveries Inventories, and the Great Moderation in Journal of Economic Dynamics and Control , Vol. 35, No. 8, 1322--1339, January, 2011