© 2009 International Monetary Fund WP/09/
IMF Working Paper
International Evidence on Recovery from RecessionsPrepared by Valerie Cerra, Ugo Panizza, and Sweta C. Saxena
Authorized for distribution by Alex MourmourasAugust 2009
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 representthose 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.
Although negative shocks have persistent effects on output on average, this paper shows thatmacroeconomic policies and the structure of the economy can influence the speed of recovery and mitigate the persistence of the shock. Indeed, monetary and fiscal stimulus andforeign aid can spur a rebound, with impacts that are asymmetrically stronger than in non-recovery years. Real depreciation and the exchange rate regime also have asymmetric growtheffects in a recovery year relative to other years of expansion. Recoveries are more sluggishin open economies, partly because fiscal policy is less effective than in closed economies.JEL Classification Numbers: C23; E32; F43; O43Keywords: Economic recovery; Growth; Recession; Business cycles; Rebound; Output lossAuthors’ E-mail addresses: firstname.lastname@example.org; email@example.com; firstname.lastname@example.org
We would like to thank Enrica Detragiache, Jeremy Piger, and participants at an IMF Institute seminar for helpfulcomments and suggestions, and William Sayavongsa for excellent research assistance.