Wednesday, April 2, 2008

Bernanke Warns of Possible Recession

Federal Reserve Board chairman Ben Bernanke testified before congress today and warned of a possible recession in the first half of 2008.

How is a "recession" defined?

It's primarily sustained, declining GDP.

Mankiw, pg 252, says "When the economy experiences a period of falling output and rising unemployment, the economy is said to be in recession." Mankiw does not specify the length of the period of decline required to constitute a recession. He then refers to the recession of 2001 in which during the first and third quarters of the year real GDP fell from the previous quarter. It seems that Mankiw does not require two consecutive quarters to define a recession.

Others, however, do require at least two consecutive quarters of declining GDP to define an economic recession. The National Bureau of Economic Research (NBER) has a Business Cycle Dating Committee which monitors economic indicators and has defined standards for defining recessions and other business cycles. Here's a link to NBER's Recession Dating Procedure.

According to NBER:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.
Who determines the GDP?

It's primarily the Bureau of Economic Analysis, which is part of the US Department of Commerce. Unfortunately, the BEA issues its GDP numbers on a quarterly, not monthly basis. You can download all the historic GDP numbers (since 1929 annually and since 1947 quarterly) in Excel format from the BEA site.

NBER makes reference to a group known as Macroeconomic Advisers (sic) which calculates a monthly GDP. I'm unable to find much information about this group and their web site ( is not currently up.

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