Corporate Finance, DeFi, Blockchain, Web3 News
Corporate Finance, DeFi, Blockchain News

FY360° | Crises and trust

The negative effects of recessions are not limited to consumption.


Among others, they could also be harmful to preferences and values. This column uses recent evidence from Russia to argue that recessions can result in a sizeable decrease in interpersonal trust. This effect is transient in places where the fall in trust is small. In these regions, trust snaps back to pre-crisis levels as GDP recovers. In the places where fall in trust is large, the effect is persistent. Even after a recovery, trust remains 10 percentage points below the pre-crisis level.

Why do we care about business cycles? In 1985, Robert Lucas famously argued that the welfare cost of macroeconomic volatility is very small – and that economists should therefore focus on long-term growth rather than on stabilisation policies. He updated his calculations in 2003 using US data from 1947 to 2001 and arrived at the same conclusions – the cost of fluctuations from the long-term consumption trend amounts to just $30 per capita per year...

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FY360° by Finyear (ex Financial Year Links) is a Finyear service on a mission to save you time and keep you smart. Our team follows the relevant news, summarize it, link to the original sources and deliver it on the Finyear website and in the daily newsletter.
FY360° by Finyear is not a finished product: please let us know what you think and if you have a suggestion, a complaint, or something we should link to, email us.

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Jeudi 12 Février 2015




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