Is economic winter coming?

  • 2019-12-19
  • Raghuram G. Rajan
What could trigger a recession in the United States? In the past, a tightening labor market after a period of expansion served as an early warning sign. Workers would become more difficult to find, wages would start climbing, corporate profit margins would tend to shrink, and firms would start raising prices. Fearing inflation, the central bank would then raise interest rates, which in turn would depress corporate investment and spur layoffs. At this point, aggregate demand would fall as consumers, fearing for their jobs, reduced their spending. Corporate inventories woul...
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