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The Difference between a Recession and a Depression*


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    The author thanks two anonymous referees for their helpful comments and suggestions.

Saul Eslake, Australia & New Zealand Banking Group Ltd, 100 Queen St, Melbourne 3145, Australia. Email:


The global financial crisis and the ensuing sharp downturns in economic activity around the world have rekindled interest in the question of the circumstances under which a “recession” can be appropriately labelled a “depression.” The differences are more profound than simply depth and duration, but reflect differences in causation and accompanying consequences. Moreover macroeconomic policies, which have been effective in responding to “recessions,” may be less effective in “depressions.”

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