It’s important to understand that recessions can have many different causes, and the optimal response from policymakers depends critically on the type of recession that occurs. Recessions can be caused by oil price shocks, Fed-induced interest rate spikes, a fall in business and consumer confidence, a drop in productivity, housing bubbles, financial meltdowns and other factors that cause either a reduction in aggregate demand or supply.

And the correct policy response after, say, an oil price shock is very different from the policy needed to respond to fall in business and consumer confidence.

–  Mark Thoma