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International Evidenceon Recovery From Recessions

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  • Valerie Cerra
  • Sweta Chaman Saxena
  • Ugo Panizza

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
Date of creation: 01 Aug 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/183

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Keywords: Economic recovery; Business cycles; Banking crisis; Concessional aid; Developed countries; Economic growth; Economic recession; Emerging markets; Exchange rate regimes; External shocks; Real effective exchange rates; Trade policy; recession; exchange rate; recessions; exchange rate regime; banking crises; currency crisis; bank_crisis; currency crises; real exchange rate; intermediate exchange rate; financial crises; intermediate exchange rate regimes; fixed exchange rate; macroeconomic policies; fixed exchange rate regime; exchange rates; growth recession; floating exchange rate; systemic financial crises; exchange rate volatility; bilateral real exchange rate; floating exchange rate regime; borderline financial crises; fixed exchange rate regimes; systemic banking crises; effective exchange rates; pre-crisis; asian crisis; floating exchange rate regimes; exchange rate changes; bank crisis;

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References

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  1. 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.
  2. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  3. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, American Economic Association, vol. 98(1), pages 439-57, March.
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  9. Ugo Panizza & Dany Jaimovich, 2007. "Procyclicality or Reverse Causality?," IDB Publications 6843, Inter-American Development Bank.
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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
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Cited by:
  1. Mathilde Maurel & Gunther Schnabl, 2012. "Keynesian and Austrian Perspectives on Crisis, Shock Adjustment, Exchange Rate Regime and (Long-Term) Growth," Open Economies Review, Springer, Springer, vol. 23(5), pages 847-868, November.
  2. Furceri, Davide & Zdzienicka, Aleksandra, 2012. "Banking Crises and Short and Medium Term Output Losses in Emerging and Developing Countries: The Role of Structural and Policy Variables," World Development, Elsevier, Elsevier, vol. 40(12), pages 2369-2378.
  3. Olga Arratibel & Davide Furceri & Reiner Martin & Aleksandra Zdzienicka-Durand, 2011. "The Effect of Nominal Exchange Rate Volatility on Real Macroeconomic Performance in the CEE Countries," Post-Print, HAL halshs-00456606, HAL.
  4. Pedro Conceição & Sebastian Levine, 2011. "The African Moment: On the Brink of a Development Breakthrough," Working Papers, United Nations Development Programme, Regional Bureau for Africa (UNDP/RBA) 2011-001, United Nations Development Programme, Regional Bureau for Africa (UNDP/RBA).
  5. Dan Corry & Anna Valero & John Van Reenen, 2011. "UK Economic Performance Since 1997: Growth, Productivity and Jobs," CEP Special Papers, Centre for Economic Performance, LSE 24, Centre for Economic Performance, LSE.
  6. Francesco Grigoli & Dalia Hakura, 2010. "Recoveries in the Middle East, North Africa, and Pakistan," IMF Working Papers 10/122, International Monetary Fund.
  7. Agnello, L. & Furceri, D. & R.M, Sousa., 2011. "Fiscal Policy Discretion, Private Spending, and Crisis Episodes," Working papers, Banque de France 354, Banque de France.
  8. Davide Furceri & Aleksandra Zdzienicka, 2010. "Banking Crises and Short and Medium Term Output Losses in Developing Countries: The Role of Structural and Policy Variables," Working Papers, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure 1014, Groupe d'Analyse et de Théorie Economique (GATE), Centre national de la recherche scientifique (CNRS), Université Lyon 2, Ecole Normale Supérieure.
  9. Bernard Fingleton & Harry Garretsen & Ron Martin, 2012. "Recessionary Shocks And Regional Employment: Evidence On The Resilience Of U.K. Regions," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 52(1), pages 109-133, 02.
  10. Berkmen, S. Pelin & Gelos, Gaston & Rennhack, Robert & Walsh, James P., 2012. "The global financial crisis: Explaining cross-country differences in the output impact," Journal of International Money and Finance, Elsevier, Elsevier, vol. 31(1), pages 42-59.
  11. Julien Allard & Rodolphe Blavy, 2011. "Market Phoenixes and Banking Ducks Are Recoveries Faster in Market-Based Financial Systems?," IMF Working Papers 11/213, International Monetary Fund.
  12. Tomanova, Lucie, 2013. "Exchange Rate Volatility and the Foreign Trade in CEEC," EY International Congress on Economics I (EYC2013), October 24-25, 2013, Ankara, Turkey, Ekonomik Yaklasim Association 267, Ekonomik Yaklasim Association.

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