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The shape of recovery: Implications of past experience for the duration of the COVID-19 recession

Barry Eichengreen, Donghyun Park and Kwanho Shin

Department of Economics, Working Paper Series from Department of Economics, Institute for Business and Economic Research, UC Berkeley

Abstract: In this paper we seek to make headway on the question of what recovery from Covid-19 recession may look like, focusing on the duration of the recovery - that is, how long it will take to re-attain the levels of output and employment reached at the prior business cycle peak. We start by categorizing all post-1960 recessions in advanced countries and emerging markets into supply-shock, demand-shock and both-shock induced recessions. We measure recovery duration as the number of years required to re-attain pre-recession levels of output or employment. We then rely on the earlier literature on business cycle dynamics to identify candidate variables that can help to account for variations in recovery duration following different kinds of shocks. By asking which of these variables are operative in the Covid-19 recession, we can then draw inferences about the duration of the recovery under different scenarios. A number of our statistical results point in the direction of lengthy recoveries.

Keywords: Economics; Econometrics; Rehabilitation; Duration of recoveries; COVID-19; Employment; Emerging markets; Output; Economic Theory; Applied Economics; Banking; finance and investment; Applied economics; Economic theory (search for similar items in EconPapers)
Date: 2021-09-01
References: Add references at CitEc
Citations: View citations in EconPapers (8)

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