How to Turn a Recession into a Depression: The Role of the Media, of the Politicians, and of the Political Analysts

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DOI: 10.4236/me.2010.13016   PDF   HTML     3,490 Downloads   6,746 Views   Citations

Abstract

By modifying slightly a standard neoclassical-synthesis macroeconomic model, this paper investigates the effects of an adverse supply or demand shock on output, employment, investment, prices, interest rates, and the exchange rate. The paper focuses on the possibility of the magnification of these effects by the media, the politicians, and the political analysts, who induce herd behavior by overstating the size of the shock. I find that such behavior destabilizes the economy by magnifying the amplitude of the business cycle and by hurting private investment, which might cause expansions to be shorter and contractions to last longer.

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D. Hatzinikolaou, "How to Turn a Recession into a Depression: The Role of the Media, of the Politicians, and of the Political Analysts," Modern Economy, Vol. 1 No. 3, 2010, pp. 144-148. doi: 10.4236/me.2010.13016.

Conflicts of Interest

The authors declare no conflicts of interest.

References

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