Financial Times FT.com

America’s recession will be hard to shift

By Wolfgang Munchau

Published: January 20 2008 16:44 | Last updated: January 20 2008 16:44

Monetary policy affects the economy with long and variable lags. This much we know. How long depends on the state of the economy in question.

In 2001, the US got away with an unusually short recession helped by aggressive interest rate cuts and an expansionary fiscal policy. But in Japan in the early 1990s, and in Germany in the early part of this decade, it took ages for low interest rates to help the real economy.

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