This site uses cookies, tags, and tracking settings to store information that help give you the very best browsing experience. Dismiss this warning
Cover IMF Working Papers
Booms, Crises, and Recoveries: A New Paradigm of the Business Cycle and its Policy Implications
Author: Ms. Valerie Cerra and Ms. Sweta Chaman Saxena
Series:
IMF Working Papers
Volume/Issue:
Volume 2017: Issue 250
Language:
English
Publication Date:
16 Nov 2017
DOI:
https://doi.org/10.5089/9781484325759.001
ISBN:
9781484325759
ISSN:
1018-5941
Pages:
31
Keywords:
WP; recession; financial crisis; crisis; business cycle; booms; crises; recoveries; output gap; growth; development; fiscal policy; monetary policy; foreign reserves; macro-prudential policy; Global Financial Crisis; output loss; economic development; debt-crisis legacy; recession consist; output gap estimate; banking recession; recession year; shift aggregate; recession period; output gaps in the United States; output gap in the recession; Business cycles; Banking crises; Potential output; Global
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.
Download PDF (1.5 MB) Download Epub
All types of recessions, on average, not just those associated with financial and political crises (as in Cerra and Saxena, AER 2008), lead to permanent output losses. These findings have far-reaching conceptual and policy implications. A new paradigm of the business cycle needs to account for shifts in trend output and the puzzling inconsistency of output dynamics with other cyclical components of production. The ‘output gap’ can be ill-conceived, poorly measured, and inconsistent over time. Persistent losses require more buffers and crisis-avoidance policies, affecting tradeoffs in prudential, macroeconomic, and reserve management policies. The frequency and depth of crises are key determinants of long-term growth and drive a new stylized model of economic development.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2017: Issue 250

dimension badge: