Meltdown may leave long-lasting scars on global economy
Friday, 25 September 2009
FE Report
The global financial crisis is likely to leave long-lasting scars on the world economy, but governments can act to stimulate a quicker revival and counter output losses, according to a new IMF study.
The study finds that banking crises typically have a long-lasting impact on the level of output, although growth eventually recovers. Lower employment, investment, and productivity all contribute to sustained output losses. While there is a strong association between the initial economic conditions and the size of the ultimate output loss, short-run macroeconomic stimulus and sustained structural reform efforts may help reduce ultimate output losses, according to the study released as part of the IMF's World Economic Outlook (WEO).
The findings, according to authors Ravi Balakrishnan, Petya Koeva Brooks, Daniel Leigh, Irina Tytell, and Abdul Abiad, suggest that the forceful macroeconomic policy response so far may help mitigate the losses.
The global financial crisis is likely to leave long-lasting scars on the world economy, but governments can act to stimulate a quicker revival and counter output losses, according to a new IMF study.
The study finds that banking crises typically have a long-lasting impact on the level of output, although growth eventually recovers. Lower employment, investment, and productivity all contribute to sustained output losses. While there is a strong association between the initial economic conditions and the size of the ultimate output loss, short-run macroeconomic stimulus and sustained structural reform efforts may help reduce ultimate output losses, according to the study released as part of the IMF's World Economic Outlook (WEO).
The findings, according to authors Ravi Balakrishnan, Petya Koeva Brooks, Daniel Leigh, Irina Tytell, and Abdul Abiad, suggest that the forceful macroeconomic policy response so far may help mitigate the losses.