The strange recession that is Czechia (from my email)

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The strange recession that is Czechia (from my email)

by  Tyler Cowen  

From the very perceptive Kamil Kovar, these are his words I will not double indent:

“Seeing your recent brief post on recession I was wondering whether you are thinking about writing a longer post on the topic of recessions in general? I find the recent macroeconomic developments very intriguing, as they challenge my previous notions of what is a recession and what pushes us into recession, and would be very interested in hearing what you think.

To be more specific, let me use European developments, which I think are even more thought-provoking from this perspective than US developments. Take an extreme example of Czechia, which combines following facts:

1. GDP has contracted for two quarters in a row, each time around 0.3% non-annualized. It is still below its pre-pandemic peak.
2. Consumption has contracted for 5 quarters in a row, cumulatively 7.6%.
3. Fixed investment has decreased in last quarter as well, albeit after strong recovery throughout the previous year and a half.
4. The reason why GDP did not drop more is because net exports surged from their extremely low values reached during the pandemic period. In last quarter government consumption also helped a lot.
5. Despite all the weakness, labor market is tight, with unemployment rate close to its pre-pandemic historical lows (in case you don’t know, it is ridiculously-sounding low at 2.1%), and employment continuing to grow.

(This as of March; more recent data continued in these trends, albeit GDP overall increased a tad bit. Also, Germany is going through something similar, albeit at much smaller scale). 

It feels like this combination just does not fit in together in terms of standard macroeconomics – if you would tell me only about consumption (2) I would say the country has to be in recession, but investment (3) and labor market (5) are clearly saying no recession. If it would be just labor market, then I could accept that it is case of labor hoarding distorting the picture, but investment also remaining robust is just hard to reconcile with recession. 

So I was wondering in what way, if any, did the last update your beliefs about “what is a recession and what pushes us into recession” in the light of the puzzling macroeconomic data of last year or so…

P.S.: In case you want to read more on the case of Czechia, or my take on what it all means, I had a blog post few months back: 

https://kamilkovar.substack.com/p/it-or-isnt-it-recession-on-regular

My way of reconciling the data with my mental models is that got real shocks pushing us into RBC-style recession, but for whatever reason we did not get the typical demand shocks that lead to a more standard recession.”

TC again: Worth a ponder!

1. Søren Kierkegaard by John Lippitt and C. Stephen Evans.

Revised:

1. Hermann von Helmholtz by Lydia Patton.
2. Analytic Philosophy in Latin America by Diana Ines Perez and Santiago Echeverri.
3. The Pragmatic Theory of Truth by John Capps.
4. Cultural Evolution by Tim Lewens and Andrew Buskell.
5. Robert Desgabets by Patricia Easton.

IEP      

1. The Compactness Theorem by Robert Leek and A. C. Paseau. (Revised)

NDPR     

1. Imitation of Rigor: An Alternative History of Analytic Philosophy by Mark Wilson is reviewed by Katherine Brading.

1000-Word Philosophy     

1. Plato’s Allegory of the Cave: The Journey Out of Ignorance by Spencer Case.

Project Vox     ∅      

Open-Access Book Reviews in Academic Philosophy Journals     ∅       

Recent Philosophy Book Reviews in Non-Academic Media   

1. Parfit: A Philosopher and His Mission to Save Morality by David Edmonds is reviewed by Stephen Mulhall at The London Review of Books.
2. A Terribly Serious Adventure: Philosophy and War at Oxford 1900-60 by Nikhil Krishnan is reviewed by Suresh Menon at The Hindu.
3. The Complete Works: Handbook, Discourses and Fragments by Epictetus, translated by Robin Waterfield is reviewed by Emily Wilson at The London Review of Books.
4. How Not To Kill Yourself: A Portrait of the Suicidal Mind by Clancy Martin is reviewed by Gordon Marino at The Los Angeles Review of Books.