They have documented significant differences in the speed at which various countries recover from recessions.

The study showed that the differences in recovery growth rates reflect macroeconomic and structural policy differences. In particular, the authors of the working paper found asymmetries in the growth response to policies in the year of recovery from recession relative to other years of economic expansion.

Fiscal and monetary stimulus and foreign aid can be more effective to boost a rebound from recession relative to the effect of these policies on growth in other stages of the business cycle. Real appreciation, fixed and intermediate exchange rate regimes, and trade openness are associated with lackluster recoveries.

The study found that fiscal policy was less effective in lifting recovery
growth in more open economies. In open economies, fiscal stimulus may spill over to higher growth in partner countries by increasing demand for imported foreign goods and services.

This finding suggests the need for more coordination in fiscal stimulus across countries, so that the spillover to other countries is offset by equivalent increases in foreign demand for domestic goods and services.

The researchers also investigated whether recovery from banking crises was different from other recoveries and found strong evidence in this direction. Banking crisis-related recoveries are more sluggish than other recoveries. However, some policies may be more effective for these situations. Fiscal policy, foreign aid, trade and capital account openness, and the exchange rate regime have disparate impacts on recovery from banking crises relative to other
recessions.

The stylized facts described in this paper open several interesting avenues for further research. Two of these avenues that the authors found particularly promising were the relationship between openness to trade and capital flows, and the asymmetric effectiveness of macroeconomic policies and the exchange rate regime on economic growth in different stages of the business cycle.#