Long-Term Damage from the Great Recession in OECD Countries
This paper estimates the long-term effects of the global recession of 2008-2009 on output in 23 countries. I measure these effects by comparing current estimates of potential output from the OECD and IMF to the path that potential was following in 2007, according to estimates at the time. The losses in potential output range from almost nothing in Australia and Switzerland to more than 30% in Greece, Hungary, and Ireland; the average loss, weighted by economy size, is 8.4%. Most countries have experienced strong hysteresis effects: shortfalls of actual output from pre-recession trends have reduced potential output almost one-for-one. In the hardest-hit economies, the current growth rate of potential is depressed, implying that the level of lost potential is growing over time.
I am grateful for excellent research assistance from Daniel Garcia Molina and for suggestions from Daniel Leigh. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.
- The loss of potential output relative to the pre-crisis path is 8.4 percent in 2015. Many macroeconomics textbooks...
Laurence Ball, 2014. "Long-term damage from the Great Recession in OECD countries," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 11(2), pages 149-160, September. citation courtesy of