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Economic Scarring: Channels and Policy Implications
Author:
Mrs. Nujin Suphaphiphat
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and
Ms. Yu Shi
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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 248
Language:
English
Publication Date:
09 Dec 2022
DOI:
https://doi.org/10.5089/9798400227257.001
ISBN:
9798400227257
ISSN:
1018-5941
Pages:
21
Keywords:
Economic scarring; covid; pandemic; health crisis; systemic banking crisis; economic shock; hysteresis; growth; crises; scarring channels; employment; sectoral output loss; macroeconomic policy; Policy implication; panel data; impulse Response; scarring channel; Systemic crises; Human capital; Global
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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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This paper documents the existence of medium-to-long term output losses following large crises using panel data that cover 192 countries from 1970 to 2015 and shows that the magnitudes of economic scarring depend on the nature of the shock, economic activity, and pre-crisis conditions. It also provides a thorough review of potential channels that can lead to scarring and presents novel empirical evidence on the significance of supply-side channels using cross-country sectoral-level data. Finally, the paper discusses policy implications based on the empirical findings.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund