Part I: Setting the Stage

Ayhan Kose, and Marco Terrones
Published Date:
December 2015
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Chapter Epigraphs

The Rediscovery of the Business Cycle is a sign of the times. Not much more than a decade ago, in what now seems a more innocent age, the “New Economics” had become orthodoxy. Its basic tenet, repeated in similar words was… “the conviction that business cycles were not inevitable”… [I]t was not until the events of 1974 and 1975, when a recession sprung on an unsuspecting world with an intensity unmatched in the post–World War II period, that the lessons of the “New Economics” were seriously challenged.

Paul A. Volcker (1978)

The most important point to remember is that the business cycle will never be eliminated; it is part of human nature. Indeed, once people think that the cycle has become a thing of the past, they act in ways that sow the seeds of the next recession. If central banks succeed in postponing a recession, they will simply encourage more reckless behavior, making the next downturn worse.

The Economist (2002)

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