Davide Accomazzo, MBA
Economic forecasting is never an easy task but admittedly this year is harder than usual. The deep financial and social dislocations we suffered in the last 12 months have set in motion dynamics we hardly understand in their full ramifications. Most forecasts seem to point to a difficult first half followed by a solid recovery in the second half of 2009.
Perhaps…
On January 3rd, Prof. Rogoff of Harvard University and Prof. Carmen Reinhart of the University of Maryland presented a new study at the American Economic Association Annual Meeting in San Francisco that illustrates the aftermath of the most significant financial crises in history in developed and emerging economies. The results of such study can help us shape our mind on what to expect in the next 12 months.
Examining the fallout from major financial crises in developed and emerging markets, Rogoff and Reinhart found strikingly similar post-crisis developments. For example, after a financial crisis, the cumulative decline in real estate prices from peak to trough averaged 35.5% and the duration of the decline averaged six years, the study showed.
But what does that tell us about the current situation in the U.S.?
As of December 2008, the real estate price decline in the U.S., as measured by the Case-Shiller index, is 28%–but only two years in duration.
Continue reading ‘U.S. Economic Recovery May Not Be So Soon in Coming’
