The Great Recession Goes Global

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One of the most interesting “boxes” in the IMF’s World Economic Outlook (in Chapter 1) is the one entitled, somewhat innocuously “Global Business Cycles”, by Marco Terrones, Ayhan Kose and Prakash Loungani at the IMF. Yet, it’s important to read until the ending paragraph:

To summarize, the 2009 forecasts of economic activity, if realized, would qualify this year as the most severe global recession during the postwar period. Most indicators are expected to register sharper declines than in previous episodes of global recession. In addition to its severity, this global recession also qualifies as the most synchronized, as virtually all the advanced economies and many emerging and developing economies are in recession.

The authors are to be commended for simultaneously analyzing the data for numerous countries (not easy, as anybody who’s tried this knows!) and applying a systematic procedure for dating the troughs and peaks.From my perspective, the graphs easily summarize the main points.weoboxpix1.gifExcerpt from Figure in Box: “Global Business Cycles,” IMF WEO April 2009.

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Excerpt from Figure in Box: “Global Business Cycles,” IMF WEO April 2009.

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Excerpt from Figure in Box: “Global Business Cycles,” IMF WEO April 2009.Related to these indicators related in the Box is the IMF’s view of the world output gap. As Econbrowser readers know, I think the output gap is another important indicator — despite the imprecision associated with such estimates — of economic distress. Here’s the relevant graph:

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Excerpt from Figure 1.9 from IMF World Economic Outlook, April 2009.

Originally published at Econbrowser and reproduced here with the author’s permission.

Menzie Chinn

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5 Responses to "The Great Recession Goes Global"

  1. Anonymous   April 28, 2009 at 10:25 am

    If I understand the graphs correctly, the IMF predicts a spectacular V-shaped recovery beginning sometime this year. So, according to the IMF forecast, the worst is behind us, the recession will end this year, and GDP growth will normalize after 2010. The indication is that now is a great time to invest in equities, especially emerging market stocks.

  2. Anonymous   April 29, 2009 at 1:57 am

    Looking at all my professional friends out of work and college grads with no job prospects, I guess the other economies are going to buy out products and lift us out.I shall no go inhale more nitrous oxide.

  3. CHRIS DAVIS   May 1, 2009 at 1:05 am

    Laying off 50% of the people formerly employed in what is euphemistically called the financial services sector has to be viewed as a plus. ANYONE can misallocate $4-8tnof loan proceeds and then turn around and pay themselves a bonus.I would argue, that, in this sector, more redundancies = less friction costs for society at large!!

  4. Anonymous   May 1, 2009 at 7:29 am

    Oil is the straw that stirred the worldwide economic meltdown