Growth Dynamics: The Myth of Economic Recovery

Valerie Cerra and Sweta C. Saxena

No 05/147, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: Economic growth; Economic recovery; Production; Business cycles (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-mac
Date: 2005-08-08
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Related works:
Working Paper: Growth Dynamics: The Myth of Economic Recovery (2005)
Working Paper: Growth dynamics: the myth of economic recovery (2007)
Journal Article: Growth Dynamics: The Myth of Economic Recovery (2008)
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