During the past 20 years, the world economy has suffered two major crises in the form of the Global Financial Crisis and the COVID-19 pandemic. This column identifies the turning points of recessions and expansions in 101 advanced and developing economies between 1990 and 2022 and analyses the drivers of economic recovery. Across the sample, deeper recessions are followed by stronger recoveries, in line with Friedman’s model of plucking a guitar string, but evidence for this ‘plucking model’ becomes weaker when institutional development is limited and trade restrictions are high. Policymakers seeking to cushion global shocks in emerging market economies will need to rely on countercyclical monetary and fiscal policies, facilitated by robust and credible monetary and fiscal policy frameworks.Read More
