DP15466 The Economic Impact of Recession Announcements

Author(s): Andrew Eggers, Martin Ellison, Sang Seok Lee
Publication Date: November 2020
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Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15466

The convention in the news media is to announce a recession if a country experiences two consecutive quarters of negative growth. We exploit the arbitrary threshold implied by this practice to identify the economic impact of recession announcements through a Regression Discontinuity Design (RDD). Estimation results show that news of a recession leads to a discontinuous fall in consumer confidence, consumption growth and final estimates of GDP growth in a panel of countries. The effect is large, robust and statistically significant.