This paper takes stock of the global economic recovery a decade after the 2008 financial crisis. Output losses after the crisis appear to be persistent, irrespective of whether a country suffered a banking crisis in 2007-08. Sluggish investment was a key channel through which these losses registered, accompanied by long-lasting capital and total factor productivity shortfalls relative to precrisis trends. Policy choices preceding the crisis and in its immediate aftermath influenced postcrisis variation in output. Underscoring the importance of macroprudential policies and effective supervision, countries with greater financial vulnerabilities in the precrisis years suffered larger output losses after the crisis. Countries with stronger precrisis fiscal positions and those with more flexible exchange rate regimes experienced smaller losses. Unprecedented and exceptional policy actions taken after the crisis helped mitigate countries' postcrisis output losses.

• Cover
• CONTENTS
• ABSTRACT
• I. INTRODUCTION
• II. QUANTIFYING LOSSES
  • A. Quantifying Post-Crisis Deviations in Output from Pre-Crisis Trends
  • B. Persistent losses: output remains below pre-crisis trend in more than 60 percent of economies
• III. CHANNELS
  • A. Proximate Causes–Sluggish Investment, Capital, and Total Factor Productivity Shortfalls
• IV. VARIATION IN POSTCRISIS PERFORMANCE -- CORRELATES
  • A. Empirical Approach
  • B. The Nature of the Shock Matters
  • C. Macroeconomic Imbalances and Financial Factors
  • D. Labor Market Structure
  • E. Spillovers
  • F. Precrisis Policies and Policy Frameworks
  • G. Extraordinary Actions Taken in the Aftermath of the Crisis
• V. SUMMARY
• VI. ANNEX: DEFINITIONS AND DATA CONSTRUCTION
  • A. Definition of Banking Crises
  • B. Definitions of Main Data Categories
  • C. Additional Details of Regression Analysis on Probability of a Banking Crisis
• VII. REFERENCES
• FIGURES
  • 1. Correlation of GDP Deviations between Periods
  • 2. Postcrisis Change in Inequality
  • 3. Postcrisis Output Deviations from Precrisis Trends
  • 4. Postcrisis Output Deviations from Precrisis Trends by Country Group, 2015-2017
  • 5. Postcrisis Output per Worker Deviations from Precrisis Trend, 2015-17
  • 6. Postcrisis Investment Deviations from precrisis TrendL Mean Trajectory
  • 7. Postcrisis Capital Stock Deviationsfrom Precrisis Trend, 2015-17
  • 8. Postcrisis Total Factor Productivity Deviations from Precrisis Trend, 2015-17
  • 9. Probability of Banking Crisis
  • 10. Postcrisis Deviations of Euro Area and Other Advanced Economies
  • 11. Impact on 2015-17 GDP Deviations from One Standard Deviation Increase in Drivers
  • Annex Figure 1. Estimates of Precrisis Trends for the United States
  • Annex Figure 2. Structural Break
  • Annex Figure 3. Distributions of GDP Deviations after Recessions
• TABLES
  • 1. Total Facor Productivity Deviations Account for Large Share of GDP per Worker Deviations
  • 2. Impact of Precrisis Conditions on 2011-13 GDP Deviations from Precrisis Trend
  • 3. Impact on 2011-13 GDP Deviations from One Standard Deviation Increase in Drivers
  • 4. Impact on 2011-13 Investment Deviations from One Standard Deviation Increase in Drivers
  • 5. Impact on 2011-13 GDP Deviations from One Standard Deviation Increase in Drivers by Country Group
  • 6. Financial Sector Support and Discretionary Fiscal Stimulus in Group of Twenty Economies
  • 7. Impact on 2015-17 GDP Deviations from One Standard Deviation Increase in Drivers
  • Annex Table 1. Banking Crises, 2007-08
  • Annex Table 2. Tests of Equality of Distributions of 2015-17 Deviations
  • Annex Table 3. Probability of Banking Crisis and the Strength of Restrictions on banking Activities
  • Annex Table 4. Banking Crisis and Regulations: Probit Regression
• REFERENCES
• References