New research shows government intervention may prolong recessions, not solve them.
Recessions can happen when there's too much stuff like houses and goods, leading to a needed adjustment. Some say we shouldn't use government spending to fix this. Others think we should use fiscal policy to boost demand. A new study shows that recessions caused by needed adjustments can also lead to low demand. So, both views might be connected. Trying to boost demand can delay the adjustment process, but some policies can still help.