Growth, Interrupted: How Crises delay Global Convergence

Patrick Imam and Jonathan Temple

No 2025/116, IMF Working Papers from International Monetary Fund

Abstract: During a major crisis, the transitional dynamics of conditional convergence are unlikely to apply. In this paper, we introduce a Markov chain approach which integrates the study of crises and convergence. We allow upwards and downwards mobility to change when a country enters a crisis regime. We find that conflict and debt crises help to explain the persistence of low relative income, and that the convergence process has changed over time. Faster global convergence in the early 2000s can be attributed partly to fewer and shorter crises, so the multiple shocks after 2020 are likely to have slowed income convergence.

Keywords: Convergence; crisis; economic growth; development accounting (search for similar items in EconPapers)
Pages: 49
Date: 2025-06-13
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