International Evidence on Recovery from Recessions
IMF Working Papers, August 1, 2009
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- International Evidence on Recovery from Recessions
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Bibliographic details
- Authors: Valerie Cerra, Sweta Chaman Saxena, Ugo Panizza
- Published: August 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451873306.001
Key findings
- Negative shocks have persistent effects on output on average.
- Macroeconomic policies and the structure of the economy can influence the speed of recovery and mitigate the persistence of the shock.
- Monetary stimulus, fiscal stimulus, and foreign aid can spur a rebound, with impacts that are asymmetrically stronger in recovery years than in nonrecovery years.
- Real depreciation and the exchange rate regime 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.
Policy-relevant implications
- Deploy monetary stimulus to support quicker rebound during recovery years, given its asymmetric stronger impact in recovery periods.
- Use fiscal stimulus during recoveries, recognizing fiscal measures have stronger effects in closed economies and are less effective in open economies.
- Consider foreign aid as a tool to spur rebound in recovery years due to its asymmetric positive impact.
- Account for exchange rate dynamics: real depreciation and the choice of exchange rate regime matter more for growth outcomes during recovery years than in other expansion years.
Subject classifications and keywords
- Subject: Banking crises, Capital account, Currency crises, Exchange rate arrangements, Fiscal policy
- Keywords: country characteristic, exchange rate, macro policy contraction, monetary policy, WP
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- _wp09183 - References