Detrending U.S. GDP and Policy Responses to Economic Recessions

Abstract

The purpose of the article is to verify whether to stimulate investment or consumption when facing a recession in order to stabilize the economy. We use the detrend method and some specific data to analyze the situation. When faced with a financial crisis, some effective measures can help stabilize the economy. To diversify the sample, we include the United States' GDP in 19812022. We tried to predict some trend that might happen in the next few years, but when facing such a financial crisis, it shows a sharp downward trend. We also find that the standard deviation of investment is larger than the standard deviation of consumption, which means that in the short term, its better to stimulate investment since it can be affected a lot. On the contrary, we had better stimulate consumption in the long term because of its stability.