Tuesday, March 27, 2012
I recently discovered the web page of the Euro Area Business Cycle Dating Committee. This performs a very similar function to the NBER Business Cycle Dating Committee in the US - ie it establishes official dates for the beginning and ending of recessions.
The above chart shows US recessions as blue bars and Euro area recessions as red bars. The chart runs from 1970 which is as far back as the Euro area committee has gone.
You can see that there is some correlation - the seventies oil shocks caused recessions in both economies, and of course the great recession hit both sides of the Atlantic equally hard.
On the whole, though, I find the differences as striking as the similarities. The great recession is the only one that is sharply synchronized. Europe didn't have a tech-crash recession in 2001. The 1991 Gulf War oil shock recession in the US didn't happen in Europe and instead there was a recession a couple of years later. Even in the 1970s, the dates only line up roughly, with Europe going into recession quite a bit later in response to the Arab embargo induced recession in 1974, and being declared to have one long recession in 1980, rather than a double-dip.
So the picture that emerges is that some economic problems and imbalances are global and cause globally synchronized recessions, while others are regional and affect different economies rather differently. Even when the cause (oil shock) is global, the timing and depth of the resulting recessions may be rather different in different places.
This helps to make sense of the current situation where Europe seems to have been sliding into a second dip as a result of the sovereign debt issues there, while the US continues to recover from the great recession, with the pace improving lately.