Output does not rebound, but recovers in the long run
Output tends to shrink markedly without rebounding in the aftermath of a banking crisis, but growth eventually does return to pre-crisis trend levels, argues a new International Monetary Fund (IMF) working paper.
Taking a sample of 88 banking crises over a wide range of countries, the paper finds that trend growth rates are in themselves unaffected by the fact that output does not rebound to its pre-crisis path, but appears to hover permanently below it.
The authors argue that the depression
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