Cross, R.; McNamara, H.; Pokrovskii, A.V. - Scottish Institute for Research in Economics (SIRE) - 2010
This paper reviews the evidence on the effects of recessions on potential output. In contrast to the assumption in … the case of recessions. A model is proposed to explain this phenomenon, based on an analogy with water flows in porous … hysteresis with regard to aggregate demand shocks, and thus retains a memory of the shocks associated with recessions. …
