The Global Economic Recovery 10 Years after the 2008 Financial Crisis

Abstract

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.

Keywords: Supply and demand, Public sector borrowing requirements, Negative interest rates, Bank credit, Central banks, Financial crisis, GDP trend, output deviations, employment deviations, bank crisis, advanced economy, WEO, TFP, deviation

JEL Classification: E23, E32, E50, E60, E65, E01, G21, E52, D4, E63