Causes of the Financial Crisis and the Slow Recovery: A 10-Year Perspective

This paper presents evidence that the recession of 2007-2009 and the weak recovery have both been caused by poor economic policies, including a shift toward more discretionary, more interventionist and less predictable actions. While these policies may have led to temporary growth spurts, average performance was poor. This view is compared with the view that the equilibrium interest rate declined secularly during the decade and that slow recovery was caused by the financial crisis.