Professor Nunes writes (and attaches a chart):

""Stilettoheels" is mistaken.The graph shows the traditional measure of growth as the latest four Qtr average over four qtyr average four qtrs ago. (or average GDP for year t over average GDP for year t-1).The "depth' of this recession (GDP wise) is still far away from the one in 1981-82 as you mentioned and "Stilettoheels" contested."

I think part of the dispute is whether you count the mini recession that shortly preceded the 1981-82 recession. Real GDP in 1981 Q2 (just before the famous 1981-82 recession) was hardly greater than it was in 1980 Q1. The 1981-82 recession therefore erased more than 3 years of GDP growth.

If real GDP growth resumes this year, and real GDP stays above my "11 trillion real GDP floor", about the same will have occurred: the 2008-9 recession will have erased less than 4 years real GDP growth.

## 2 comments:

OK Mulligan and Nunes, I must be dazed and confused but let's do some

realGDP arithmetic. Remember Mulligan posted levels not percentages. Levels must be interpreted in context of percentages.We will do it 2 ways.

1. Cumulative percentage decline from NBER peak to trough.

2. Cumulative percentage decline from GDP peak to trough.

Real GDP quarterly levels are here. NBER peaks are here.

1. 1981.Q3 NBER peak level is 5.3298, 1982.Q4 trough level is 5.1898. Cumulative decline is

2.627%. 2007.Q4 NBER peak level is 11.6207, 2009.Q1 (trough?) level is 11.3409. Cumulative decline is2.407%.2. 1981.Q3 GDP peak level is 5.3298,

1982.Q3 trough level is 5.1852. Cumulative decline is

2.713%. 2008.Q2 GDP peak level is 11.7274, 2009.Q1 (trough?) level is 11.3409. Cumulative decline is3.296%.The 2007 recession cumulative GDP (not NBER) decline already exceeds the 1981 recession, subject to revisions.

Mulligan's assertion that the level of GDP can fall from either 11.6207 or 11.7274 to 11.0 and the percentage decline is less than either 2.627% or 2.713% is an egregious error.

Definition of growth: "A positive change in the level of production of goods and services by a country over a certain period of time".

So recession means negative growth.

When year end comes along the calculation of GDP growth in 2009 will find the average level of GDP in 2009 and compare with the average level in 2008. We can do the same thing quarter by quarter and find the average,say,of the GDP level between 08.2 and 09.1 (A)and compare that to the average of 07.2 to 08.1 (B). A/B will give you the growth (or fall) in GDP over the period. The expression "a certain period of time" is usually meant to be 1 year (4 quarters).It provides a smoothed "trend". It is based on this metric that the figure shows that the present recession is much less deep than the 81-82 recession. It may become deeper but that only the "future" will tell!

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