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Growth Dynamics: The Myth of Economic Recovery
Author:
Ms. Sweta Chaman Saxena null

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and
Ms. Valerie Cerra
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Series:
IMF Working Papers
Volume/Issue:
Volume 2005: Issue 147
Language:
English
Publication Date:
01 Jul 2005
DOI:
https://doi.org/10.5089/9781451861662.001
ISBN:
9781451861662
ISSN:
1018-5941
Pages:
43
Keywords:
WP; rate of growth; recession episode; regime change; terms of trade; transition country
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund