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Financial Crises Tend to Have Long Impact on the Economy
September 22, 2009
- IMF study finds financial crises cause longer-term economic damage;
- But governments can act to reduce fallout;
- Impact on jobs expected to persist.
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).[...]
- IMF study finds financial crises cause longer-term economic damage;
- But governments can act to reduce fallout;
- Impact on jobs expected to persist.
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).[...]