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Hysteresis and Business Cycles
IMF Working Papers
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as "hysteresis," argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from thedoi:10.5089/9781513536996.001 fatcat:3llv4puhovf2vapth32tbgkoly