Macroeconomics of War and Recovery

IMF Working Papers, September 4, 2026

Source details

Authors: Hippolyte W. Balima, Colombe Ladreit, Andresa Helena Lagerborg, Flavien Moreau, Andrea F Presbitero, Evgenia Weaver
Published: September 4, 2026
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798229059015.001

Title: Macroeconomics of War and Recovery
Authors: Hippolyte W. Balima, Colombe Ladreit, Andresa Helena Lagerborg, Flavien Moreau, Andrea F Presbitero, Evgenia Weaver
Date: September 4, 2026
Scope: Global dataset covering 194 countries over the period 1946–2024, including 170 conflict onsets and 158 conflict terminations.
Methodology: Local-projection difference-in-differences framework complemented by geocoded firm-level evidence.

Output losses:
- Output losses from conflicts typically exceed those associated with banking, currency, and sovereign debt crises, as well as severe natural disasters.
External-sector dynamics:
- External-sector dynamics constitute a central mechanism through which wars amplify macroeconomic challenges, despite policymakers’ efforts to contain the war shock.
Post-conflict recoveries:
- Post-conflict recoveries are slow and uneven and depend critically on the durability of peace.
- Conflict resumption stalls recovery prospects, while sustained peace produces only gradual recoveries relative to wartime losses.
- Recoveries are typically labor-led, while capital accumulation and productivity remain subdued.
Firm-level confirmation:
- Firm-level evidence confirms the labor-led recovery and points to persistent financial constraints that hinder capital rebuilding during the postconflict period.

Dataset coverage:
- 194 countries
- 170 conflict onsets
- 158 conflict terminations
- Period: 1946–2024
Empirical approach:
- Local-projection difference-in-differences framework
- Complementary geocoded firm-level evidence to trace macroeconomic aggregates around conflict onset and termination

Recovery patterns:
- Recoveries are slow and uneven.
- Durability of peace is critical: resumed conflict stalls recovery; sustained peace yields gradual recovery relative to wartime losses.
Composition of recovery:
- Labor-led recoveries dominate.
- Capital accumulation remains subdued.
- Productivity remains subdued.
Role of external sector:
- External-sector dynamics are a central channel amplifying macroeconomic challenges during wars, even when policymakers attempt containment.

Confirms macro findings:
- Labor-led nature of post-conflict recovery.
- Persistent financial constraints at the firm level that impede capital rebuilding during the postconflict period.