Macroegonomics
…the need for restructuring is what makes serious financial crises different from ordinary recessions—and why the recessions those crises set off tend to last an especially long time. The longer the restructuring is postponed, the longer the recession will linger, as Japan learned during its “lost decade” of the 1990s.
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Good policy may limit the pain. But, as the unknown story of the Great Moderation itself suggests, even the best policy can go only so far. As discomfiting as it is to both market optimists and policy activists, a certain amount of instability is inherent to the economy.