Slow Recoveries: A Structural Interpretation

• Authors: Jordi Galí.
• BSE Working Paper: 110118 | September 15
• Keywords: jobless recoveries , U.S. business cycle , estimated DSGE models , Okun's law
• JEL codes: E32
• jobless recoveries
• U.S. business cycle
• estimated DSGE models
• Okun's law

An analysis of the performance of GDP, employment and other labor market variables following the troughs in postwar U.S. business cycles points to much slower recoveries in the three most recent episodes, but does not reveal any significant change over time in the relation between GDP and employment. This leads us to characterize the last three episodes as slow recoveries, as opposed to jobless recoveries. We use the estimated New Keynesian model in Galí-Smets-Wouters (2011) to provide a structural interpretation for the slower recoveries since the early nineties.