Growth Dynamics: The Myth of Economic Recovery
Abstract
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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Large negative shocks such as financial crises or wars typically generate permanent output losses rather than temporary deviations from trend.
“Seminal work by Cerra and Saxena (2008) shows that large negative shocks such as financial crises or wars, typically generate permanent output losses rather than temporary deviations from trend.”
From Confrontation with the West and Long-Run Economic and Institutional Outcomes: Evidence from Iran (2026) · cites this paper as Cerra and Saxena (2008)
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References 83 · Cited by 1,356
- Authors
- Cerra, V., & Saxena, S. C.
- Affiliations
- International Monetary Fund (US)
- Bank for International Settlements (CH)
- ORCID
- Saxena, Sweta Chaman
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2008-03-01
- Volume
- 98
- Issue
- 1
- Pages
- 439-457
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W2152556759
- Cited by
- 1,356
- References
- 83
- Citations by year
- 2026: 58 · 2025: 59 · 2024: 54 · 2023: 56 · 2022: 87 · 2021: 84 · 2020: 99 · 2019: 74 · 2018: 58 · 2017: 84 · 2016: 63 · 2015: 100 · 2014: 93 · 2013: 65 · 2012: 67
- FWCI
- 139.45
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- American Economic Review (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › Finance › Global Financial Crisis and Policies
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic Growth and Productivity
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Keywords
- economic growth dynamics, financial crisis, political crisis, civil war, economic recovery, optimism, emerging markets, transition economies, developing countries
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