What Causes a Recession? February 2, 2018 IN10853

“At 104 months, the current economic expansion is already the third longest on record, and it will equal the second longest if it persists until April. This expansion, like all previous ones, will eventually end and be followed by a recession. Few economists are forecasting a recession in 2018, but recessions are notoriously hard to predict even a few months beforehand. For background, see CRS In Focus IF10411, Introduction to U.S. Economy: The Business Cycle and Growth, by [author name scrubbed]…What will bring this economic expansion to an end? In the words of Janet Yellen, “it’s a myth that expansions die of old age.” Instead, a look at the historical record points to a few culprits that have killed off expansions since the end of World War II—an overheating economy that results in accelerating price inflation, a financial bubble, or an external “shock” to the economy, such as an oil price spike. The longer an expansion lasts, the more likely it will fall victim to one of these killers. What preceded this expansion—the “Great Recession“—could potentially make this business cycle unique, however…”