## Economic Scarring: Channels and Policy Implications

_IMF Working Papers, December 9, 2022_

## Source details

**Canonical URL:** [Economic Scarring: Channels and Policy Implications](https://www.imf.org/en/publications/wp/issues/2022/12/09/economic-scarring-channels-and-policy-implications-526841)

## Other formats

- [Markdown version](/en/publications/wp/issues/2022/12/09/economic-scarring-channels-and-policy-implications-526841/index.md)
- [Structured JSON version](/en/publications/wp/issues/2022/12/09/economic-scarring-channels-and-policy-implications-526841/index.json)
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## Bibliographic details
- Authors: Nujin Suphaphiphat, Yu Shi
- Published: December 9, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400227257.001

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### Summary
- Documents the existence of medium-to-long term output losses following large crises using panel data that cover 192 countries from 1970 to 2015.
- Shows that the magnitudes of economic scarring depend on:
  - the nature of the shock,
  - economic activity, and
  - pre-crisis conditions.
- Provides a review of potential channels that can lead to scarring.
- Presents novel empirical evidence on the significance of supply-side channels using cross-country sectoral-level data.
- Discusses policy implications based on the empirical findings.

### Data, scope, and methodology
- Panel data covering 192 countries from 1970 to 2015.
- Sectoral-level cross-country data used to identify supply-side channels.
- Working Paper length: 21 pages.

### Key findings and empirical results
- Medium-to-long term output losses are documented following large crises in the sample.
- Magnitude of scarring varies by:
  - nature of the shock,
  - type of economic activity affected,
  - pre-crisis economic conditions.
- Supply-side channels are empirically significant when examined with cross-country sectoral-level data.

### Channels of scarring reviewed
- Multiple potential channels are reviewed (supply-side emphasis highlighted in the paper).
- Supply-side channels receive novel empirical investigation at the sectoral level.

### Policy implications
- Policy discussion is grounded in the empirical findings on scarring magnitudes and channels.
- Implications focus on addressing the specific channels (including supply-side bottlenecks) and accounting for differences by shock type, economic activity, and pre-crisis conditions.

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## Content in this bundle

- **Working Paper**
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  - [Working Paper (PDF)](/-/media/files/publications/wp/2022/english/wpiea2022248-print-pdf.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2022/12/09/economic-scarring-channels-and-policy-implications-526841_