Growth Dynamics: The Myth of Economic Recovery

July 1, 2005

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Sweta Chaman Saxena, and Valerie Cerra. Growth Dynamics: The Myth of Economic Recovery, (USA: International Monetary Fund, 2005) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Using panel data for a large number of countries, we find that economic contractions are not followed by offsetting fast recoveries. Trend output lost is not regained, on average. Wars, crises, and other negative shocks lead to absolute divergence and lower long-run growth, whereas we find absolute convergence in expansions. The output costs of political and financial crises are permanent on average and long-term growth is negatively linked to volatility. These results also imply that panel data studies can help identify the sources of growth and that economic models should be capable of explaining growth and fluctuations within the same framework.

Subject: Banking, Banking crises, Currency crises, Financial crises, Personal income

Keywords: Rate of growth, Recession episode, Regime change, Terms of trade, Transition country, WP

Publication Details

Pages:

43
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/147
Stock No:

WPIEA2005147
ISBN:

9781451861662
ISSN:

1018-5941

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