How long and how deep will the current US recession be? How does the Fed’s monetary policy response compare to previous comparable episodes, and what has typically happened to inflation during such periods? While history never repeats itself, it often rhymes. That’s why we examine not only the past four US recessions (1975, 1981, 1990 and 2001) but also five big bank-centred financial crises that occurred in other countries during the past 30 years (Spain 1977, Norway 1987, Finland 1991, Sweden 1991 and Japan 1992) to help answer the questions above. We find some striking empirical similarities between the average US recession and the average of the five major banking and financial crises, but also some important differences. Whether this US recession will be more akin to the last few on its shores or to the Big Five foreign crises holds the key for risky asset prices. In either case, there is likely to be more pain ahead across the board.Morgan Stanley - Global Economic Forum
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