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Jan 03 2012

G7 Expansions at Risk

With the Great Recession still a fresh memory, the global economy is facing another downturn, with some countries already in recession. The perceived shortness of the recoveries took most by surprise, demolishing expectations that a severe recession would be followed by a strong and prolonged recovery.

It should not have. Our recent analysis extends our original work on the U.S. economy from 2009 that was also previewed in The New York Times in 2008, to show that the key determinants of the length of an expansion were already stacked against a long expansion across most G7 economies. So, while most observers will blame the current recessions on shocks emanating from the Eurozone, the weakness in these economies is much more fundamental.