Posts tagged 'Output gaps'

Which came first, the bank failure or the output gap?

Do bank failures really exacerbate output declines? Do they consequently justify extensive responses to prevent future failures?

Ben Bernanke famously argued in 1983 that bank failures did exacerbate the Great Depression because of how they impacted credit intermediation channels. His findings helped to justify much of the extraordinary intervention we have seen since 2008. Read more