Slow Recoveries: A Structural Interpretation


  • Prepared for the JMCB-SNB-UniBern Conference, held in Gerzensee on October 20–21, 2011. We thank the editor, two anonymous referees, our discussant Andy Levin, participants at the JMCB-SNB-UniBern Conference, and CREI-CEPR Workshop on Jobless Recoveries, as well as seminars at CREI-UPF and UB for useful comments. The views expressed here do not necessarily represent those of the European Central Bank or the National Bank of Belgium. Alain Schlaepfer provided excellent research assistance. Galí acknowledges financial support from Ministerio de Ciencia e Innovación (ECO2011-23188).


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, and Wouters (2011) to provide a structural interpretation for the slower recoveries since the early nineties.