Although negative shocks have persistent effects on output on average, this paper shows that macroeconomic policies and the structure of the economy can influence the speed of recovery and mitigate the persistence of the shock. Indeed, monetary and fiscal stimulus and foreign aid can spur a...

This paper studies the apparent contradictions between two strands of the literature on the effects of financial intermediation on economic activity. On the one hand, the empirical growth literature finds a positive effect of financial depth as measured by, for instance, private domestic credit...

A common legacy of banking crises is a large increase in government debt, as fiscal resources are used to shore up the banking system. Do crisis response strategies that commit more fiscal resources lower the economic costs of crises? Based on evidence from a sample of 40 banking crises we find...

Using panel data for a large number of countries, we find that economic contractions are not followed by offsetting fast recoveries. Trend output lost is not regained, on average. Wars, crises, and other negative shocks lead to absolute divergence and lower long-run growth, whereas we find...

Recoveries that occur in the absence of credit growth are often dubbed miracles and named after mythical creatures. Yet these are not rare animals, and are not always miracles. About one out of five recoveries is "creditless", and average growth during these episodes is about a third lower than...

India’s financial system compares favorably internationally, but rising credit risk and liquidity pressures are putting it under strain. The staff report for India’s 2008 Article IV Consultation discusses economic developments and policies. The authorities have already taken...

This paper discusses key findings of the Second Review Under the Stand-By Arrangement for Peru. The economy continued to perform well in 2004. Real GDP grew by 5.1 percent, inflation was 3.5 percent at end-December, and the fiscal deficit of the combined public sector narrowed to 1.1 percent of...

Uruguay’s First Review Under the Stand-By Arrangement and Request for Modification of Performance Criteria are discussed. Growth has slowed from the strong post-crisis recovery, and inflation has remained subdued. Export growth has been strong, and although a sharp recovery in imports...

This 2009 Article IV Consultation highlights that India’s medium-term growth prospects remain bright. Prompt fiscal and monetary easing, combined with the fiscal stimulus already in the pipeline and the return of risk appetite in financial markets, have brought growth close to pre-crisis...

Strong economic policies and a supportive external environment have contributed to rapid growth, low inflation, strengthened external position, and an improved debt structure helping Uruguay perform well under the Stand-By Arrangement. Executive Directors commended the fiscal and monetary...