Expect longer recessions and more severe downturns due to economic volatility shifts.
The article explains why recessions can become more intense and business cycles longer. By studying different economic models, the researchers found that changes in inflation aversion or commitment to stabilizing output can cause this shift in volatility. When these commitments increase, we see smoother economic expansions but more severe recessions. This means we can expect less frequent but more intense economic downturns in the future. The key factor driving these results is having moderate expectations for output or earnings growth.