IMF Working Papers

Economic Scarring: Channels and Policy Implications

By Nujin Suphaphiphat, Yu Shi

December 9, 2022

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Nujin Suphaphiphat, and Yu Shi. Economic Scarring: Channels and Policy Implications, (USA: International Monetary Fund, 2022) accessed November 12, 2024

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Summary

This paper documents the existence of medium-to-long term output losses following large crises using panel data that cover 192 countries from 1970 to 2015 and shows that the magnitudes of economic scarring depend on the nature of the shock, economic activity, and pre-crisis conditions. It also provides a thorough review of potential channels that can lead to scarring and presents novel empirical evidence on the significance of supply-side channels using cross-country sectoral-level data. Finally, the paper discusses policy implications based on the empirical findings.

Keywords: Covid, Crises, Economic scarring, Economic shock, Employment, Growth, Health crisis, Hysteresis, Macroeconomic policy, Pandemic, Scarring channels, Sectoral output loss, Systemic banking crisis

Publication Details

  • Pages:

    21

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2022/248

  • Stock No:

    WPIEA2022248

  • ISBN:

    9798400227257

  • ISSN:

    1018-5941