Postrecession Path Remains Unclear: Fed Vice Chairman Fischer

Stanley Fischer

Although the Great Recession has been over for more than five years in the United States, its consequences continue to reverberate around the world, Fed Vice Chairman Stanley Fischer said during an August 11 speech in Sweden.

"Its depth and breadth appear to have changed the economic environment in many ways and to have left the road ahead unclear,"Fischer said at a Stockholm conference sponsored by the Swedish Ministry of Finance.

Fischer focused on three aspects of the challenges policymakers face in the post-Great Recession economy. Those three included financial sector reform and the recessions' impact on monetary policy. But perhaps the most fundamental of the three challenges is the impact of the recession and global financial crisis on the growth of economic output in the short and longer term.

Recovery keeps disappointing
The pace of the global recovery has been disappointing and below average compared with past recoveries, even considering the severity of the recession and financial crisis, Fischer said. Disappointing economic growth in advanced and emerging economies has led to downgraded projections for the near and more distant future, he added.

And the "pattern of disappointment and downward revisions" establishes the basic challenge facing policymakers: restoring growth, if that’s possible, Fischer declared.

In trying to formulate policies to promote growth, Fischer pointed out that policymakers need to separate the cyclical from the more permanent structural effects of the recession. That task is not easy, he warned.

"But three things are for sure: first, the rate of growth of productivity is critical to the growth of output per capita; second, the rate of growth of productivity at the frontiers of knowledge is especially difficult to predict; and third, it is unwise to underestimate human ingenuity," Fischer said.

August 8, 2014

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