American Economic Review: Vol. 98 No. 1 (March 2008)


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Growth Dynamics: The Myth of Economic Recovery

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Cerra, Valerie, and Sweta Chaman Saxena. 2008. "Growth Dynamics: The Myth of Economic Recovery." American Economic Review, 98(1): 439-57.

DOI: 10.1257/aer.98.1.439


Using panel data for a large set of high-income, emerging market, developing, and transition countries, we find robust evidence that the large output loss from financial crises and some types of political crises is highly persistent. The results on financial crises are also highly robust to the assumption on exogeneity. Moreover, we find strong evidence of growth over optimism before financial crises. We also find a distinction between the output impact of civil wars versus other crises, in that there is a partial output rebound for civil wars but no significant rebound for financial crises or the other political crises. (JEL D72, D74, E32, E44, O17, O47)

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Cerra, Valerie (IMF)
Saxena, Sweta Chaman (Bank for International Settlements)

JEL Classifications

E23: Macroeconomics: Production
E32: Business Fluctuations; Cycles
O47: Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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