knoop - recessions and depressions; understanding business cycles, 2e (2010)

RECESSIONS AND DEPRESSIONS Understanding Business Cycles Second Edition Todd A. Knoop Professor of Economics and Business Cornell Col lege PRAEGER An Imprint of ABC-CLIO, LLC RECESSIONS AND DEPRESSIONS RECESSIONS AND DEPRESSIONS Understanding Business Cycles Second Edition Todd A. Knoop Professor of Economics and Business Cornell Col lege PRAEGER An Imprint of ABC-CLIO, LLC Copyright 2010 by Todd A. Knoop All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, except for the inclusion of brief quotations in a review, without prior permission in writing from the publisher. Library of Congress Cataloging-in-Publication Data Knoop, Todd A. Recessions and depressions : understanding business cycles / Todd A. Knoop. — 2nd ed. p. cm. Includes bibliographical references and index. ISBN 978–0–313–38163–8 (hard copy : alk. paper) — ISBN 978–0–313–38164–5 (ebook) 1. Business cycles. 2. Economic forecasting. 3. Business cycles—United States— History. 4. Business cycles—History—20th century. I. Title. HB3711.K63 2010 338.5’42—dc22 2009036152 1413121110 12345 This book is also available on the World Wide Web as an eBook. Visit www.abc-clio.com for details. Praeger An Imprint of ABC-CLIO, LLC ABC-CLIO, LLC 130 Cremona Drive, P.O. Box 1911 Santa Barbara, California 93116-1911 This book is printed on acid-free paper Manufactured in the United States of America To my family with all my love: Deb, Edie, and Daphne. In the middle of the last century, a great dispute arose among astron- omers respecting one of the planets. Some, in their folly, commenced a war of words, and wrote hot books against each other; others, in their wisdom, improved their telescopes and soon settled the ques- tion forever. Education should mitigate the latter. Horace Mann, Lectures on Education (1855) Contents List of Figures ix List of Tables xi Preface xiii Part I: The Facts of Business Cycles 1 1 Why Study Business Cycles? 3 2 Describing Business Cycles 11 Part II: The Macroeconomic Theory of Business Cycles and Forecasting 23 3 Early Business Cycle Theories 25 4 Keynes’s and Keynesian Theory 39 5 The Monetarist Model 55 6 The Rational Expectations Model 73 7 Real Business Cycle Models 85 8 New Keynesian Models 97 9 Models of Credit and Financial Instability 111 10 Macroeconomic Forecasting 131 Part III: Business Cycles in the United States 1 45 11 The Great Depression 147 12 Postwar Business Cycles in the United States 163 Part IV: Modern International Recessions and Depressions 187 13 The East Asian Crisis and the IMF 189 14 The Great Recessio n in Japan 217 15 The 2007 Global Financial Crisis 231 16 Conclusions—What We Know and Do Not Know about Business Cycles 251 Bibliography 263 Index 271 . RECESSIONS AND DEPRESSIONS Understanding Business Cycles Second Edition Todd A. Knoop Professor of Economics and Business Cornell Col lege PRAEGER An Imprint of ABC-CLIO, LLC RECESSIONS AND DEPRESSIONS RECESSIONS. Congress Cataloging-in-Publication Data Knoop, Todd A. Recessions and depressions : understanding business cycles / Todd A. Knoop. — 2nd ed. p. cm. Includes bibliographical references and index. ISBN. AND DEPRESSIONS RECESSIONS AND DEPRESSIONS Understanding Business Cycles Second Edition Todd A. Knoop Professor of Economics and Business Cornell Col lege PRAEGER An Imprint of ABC-CLIO, LLC Copyright