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International Evidence on Recovery from Recessions

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Author Info

  • Ugo Panizza
  • Valerie Cerra
  • Sweta Chaman Saxena

Abstract

Although negative shocks have persistent effects on output on average, this paper shows that macroeconomic policies and the structure of the economy can influence the speed of recovery and mitigate the persistence of the shock. Indeed, monetary and fiscal stimulus and foreign aid can spur a rebound, with impacts that are asymmetrically stronger than in nonrecovery years. Real depreciation and the exchange rate regime also have asymmetric growth effects in a recovery year relative to other years of expansion. Recoveries are more sluggish in open economies, partly because fiscal policy is less effective than in closed economies.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/183.

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Length: 30 pages
Date of creation: 05 Aug 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/183

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Related research

Keywords: Banking crisis ; Business cycles ; Concessional aid ; Developed countries ; Economic growth ; Economic recession ; Economic recovery ; Emerging markets ; Exchange rate regimes ; External shocks ; Fiscal policy ; Monetary policy ; Real effective exchange rates ; Trade policy ;

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References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ugo Panizza & Dany Jaimovich, 2007. "Procyclicality or Reverse Causality?," RES Working Papers 4508, Inter-American Development Bank, Research Department.
  2. Valerie Cerra & Sweta Chaman Saxena, 2007. "Growth dynamics: the myth of economic recovery," BIS Working Papers 226, Bank for International Settlements.
  3. Lo, Ming Chien & Piger, Jeremy, 2005. "Is the Response of Output to Monetary Policy Asymmetric? Evidence from a Regime-Switching Coefficients Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(5), pages 865-86, October.
  4. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
  5. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc.
  6. Ale Bulir & A. Javier Hamann, 2003. "Aid Volatility: An Empirical Assessment," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 4.
  7. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  8. Christina D. Romer & David H. Romer, 1990. "Does Monetary Policy Matter? A New Test in the Spirit of Friedman and Schwartz," NBER Working Papers 2966, National Bureau of Economic Research, Inc.
  9. Michael Clemens & Steven Radelet & Rikhil Bhavnani, 2004. "Counting Chickens When They Hatch: The Short-term Effect of Aid on Growth," Working Papers 44, Center for Global Development.
  10. Wesley Clair Mitchell, 1927. "Business Cycles: The Problem and Its Setting," NBER Books, National Bureau of Economic Research, Inc, number mitc27-1.
  11. Alejandro Izquierdo & Ernesto Talvi & Guillermo A Calvo, 2006. "Phoenix miracles in emerging markets: recovering without credit from systemic financial crises," BIS Working Papers 221, Bank for International Settlements.
  12. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
  13. Raghuram G. Rajan, 2005. "Aid and Growth: What Does The Cross-Country Evidence Really Show?," Working Papers id:54, eSocialSciences.
  14. repec:cdl:econwp:2089097 is not listed on IDEAS
  15. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  16. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  17. Jeremy Piger & James Morley & Chang-Jin Kim, 2005. "Nonlinearity and the permanent effects of recessions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 291-309.
  18. Luc Laeven & Fabian Valencia, 2008. "Systemic Banking Crises: A New Database," IMF Working Papers 08/224, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. The growth problem
    by chris dillow in Stumbling and Mumbling on 2011-08-07 11:01:20
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
Cited by:
  1. Davide, Furceri & Aleksandra, Zdzienicka, 2010. "Banking Crises and Short and Medium Term Output Losses in Developing Countries: The Role of Structural and Policy Variables," MPRA Paper 22078, University Library of Munich, Germany.
  2. Mathilde Maurel & Gunther Schnabl, 2011. "Keynesian and Austrian Perspective on Crisis, Shock Adjustment, Exchange Rate Regime and (Long-Term) Growth," Documents de travail du Centre d'Economie de la Sorbonne 11004, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  3. Luca Agnello & Davide Furceri & Ricardo M. Sousa, 2011. "Fiscal Policy Discretion, Private Spending, and Crisis Episodes," NIPE Working Papers 31/2011, NIPE - Universidade do Minho.
  4. repec:cep:cepsps:24 is not listed on IDEAS
  5. Rodolphe Blavy & Julien Allard, 2011. "Market Phoenixes and Banking Ducks Are Recoveries Faster in Market-Based Financial Systems?," IMF Working Papers 11/213, International Monetary Fund.
  6. Francesco Grigoli & Dalia Hakura, 2010. "Recoveries in the Middle East, North Africa, and Pakistan: Have Macroeconomic Policies Been Effective?," IMF Working Papers 10/122, International Monetary Fund.

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