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Hysteresis

Tuesday, September 01, 2009
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This recent article in the Financial Times discusses how the world recession may have severe long-term effects on the UK economy, exhibiting strong hysteresis effects.

That is to say, there has been a step-change in the UK’s productive capacity in a permanent manner. So even when the UK comes out of the recession, it won’t be on the same path as before (even if the rates of growth may get there, the levels will not).  The article discusses reasons why this may happen.


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