Crises in Asia: Recovery and Policy Responses

The goal of this paper is to provide stylized facts on recovery from economic downturns and to evaluate the role of macroeconomic policies in promoting recovery. In particular, we examine gross domestic product (GDP) recessions and financial downturns (credit contractions and stock price declines) using data from 21 Organisation for Economic Co-operation and Development (OECD) economies and 21 developing Asian economies. We find, in general, recovery from a GDP recession in Asian economies is somewhat slower than in OECD economies. However, recovery from a financial downturn is not much different between Asian and OECD economies. We also find OECD economies have been more active and effective in using counter-cyclical policies than Asian economies in the face of GDP recessions and financial downturns. Recent evidence, however, suggests Asian economies may have better success in the current global crisis.