1. World Economic Outlook April 2009

2. Chapter III From Recession to Recovery: How Soon and How Strong? Prepared by: Prakash Kannan, Alasdair Scott and Marco Terrones with support from Gavin Asdorian and Emory Oakes

3. Questions Are recessions and recoveries associated with financial crises different from others? Are recessions and recoveries associated with financial crises different from others? What are the main features of globally synchronized recessions? What are the main features of globally synchronized recessions? Can countercyclical policies help shorten recessions and strengthen recoveries? Can countercyclical policies help shorten recessions and strengthen recoveries?

4. We Examine Business Cycles in 21 Advanced Economies … Excluding the current recessions, there were 122 recessions since 1960. Of which: 15 were associated with financial crises 37 were globally synchronized (1975, 1980 and 1992). 6 were both associated with financial crises and globally synchronized.

5. Recessions and Recoveries are Longer when Global and associated w/ Financial Crises … RecessionsRecoveries

6. Mainly Reflecting Consumption Dynamics … (Median = 100 at t = 0; peak in output at t = 0) Financial Crises Highly Synchronized Recessions

7. Which, in turn, Reflect House Prices Dynamics … (Median = 100 at t = 0; peak in output at t = 0) Financial Crises Highly Synchronized Recessions

8. Exports Play Important Role in Recovery … (Median = 100 at t = 0; peak in output at t = 0) Financial Crises Highly Synchronized Recessions

9. Policies Help Shorten Recessions … Fiscal Stimulus is Effective in Financial Crises … (Probability of remaining in a recession beyond a certain number of quarters)

10. … Effectiveness of Fiscal Policy Affected by Public Debt Levels …

11. Current Recessions Likely to Be Severe … (Median log differences from one year earlier; peak in output level at t = 0; quarters on x-axis) Output Current U.S. recession 50 percent interval of previous recessions Private Consumption Unemployment Rate (median percentage point difference from one year earlier) Residential Investment

12. … with Potentially Weak Recoveries … (Median log differences from one year earlier; peak in output level at t = 0; quarters on x-axis) Credit Nominal Interest Rate (median percentage point difference from one year earlier) House Prices Government Consumption Equity Prices Current U.S. recession 50 percent interval of previous recessions

13. Policy Message The current recessions are likely to be long lasting and severe with weak recoveries …. The current recessions are likely to be long lasting and severe with weak recoveries …. Monetary and fiscal policies can help reduce the duration of the current recessions and strengthen economic recovery … Monetary and fiscal policies can help reduce the duration of the current recessions and strengthen economic recovery …