Front Matter

Front Matter

Ayhan Kose, and Marco Terrones
Published Date:
December 2015
  • ShareShare
Show Summary Details

© 2015 International Monetary Fund

Cataloging-in-Publication Data Joint Bank-Fund Library

Kose, M. Ayhan.

Collapse and revival : understanding global recessions and recoveries / by M. Ayhan Kose and Marco Terrones. – Washington, D.C. : International Monetary Fund, 2015.

pages ; cm.

Includes bibliographical references and index.

1. Financial crises. 2. Recessions. 3. Business cycles. 4. Global Financial Crisis, 2008–2009. I. Terrones, Marco. II. International Monetary Fund.

HB3722.K67 2015

Disclaimer: The views expressed in this book are those of the author(s) and do not necessarily represent the views of the IMF, World Bank, their Executive Boards, or their managements.

Recommended citation: Kose, M. Ayhan, and Marco E. Terrones. 2015. Collapse and Revival: Understanding Global Recessions and Recoveries. Washington: International Monetary Fund.

ISBN: 978-1-51357-002-0 (paper)

ISBN: 978-1-48439-173-0 (ePub)

ISBN: 978-1-48434-244-2 (Mobi)

ISBN: 978-1-47552-336-2 (PDF)

Information about and access to digital content associated with this book are available at:

Publication orders may be placed online, by fax, or through the mail:

International Monetary Fund, Publication Services

P.O. Box 92780, Washington, DC 20090, U.S.A.

Telephone: (202) 623-7430 Fax: (202) 623-7201


Advance Praise for Collapse and Revival

This book makes a valuable contribution to the literature on business cycles by carefully and systematically documenting patterns of global recessions and recoveries. Kose and Terrones have written a timely and authoritative book that is rich in analytical material, yet clear and cogent enough to be of broad interest. Collapse and Revival will become a standard reference in the international business cycle literature and is required reading for academics, policymakers, and students interested in understanding macroeconomic fluctuations both at the national level and in the global economy.

Eswar Prasad

Nandlal P. Tolani Senior Professor of Trade Policy and Professor of Economics, Cornell University

This important new book is a welcome study of global business cycles—a phenomenon that goes back centuries. It defines these cycles and identifies four of them in recent decades. It analyzes their salient characteristics and their relationship to national business cycles. It is a must-read for macroeconomists and policymakers.

Michael Bordo

Board of Governors Professor of Economics Rutgers University

This impressive work culminates a research program of central importance—the investigation of the definition and nature of global recessions and recoveries. The authors deploy a comprehensive statistical documentation of global business cycles in an accessible—yet empirically rigorous—fashion, weaving in the most recent thinking on the linkages between financial crises, recessions, and recoveries. Collapse and Revival is sure to become the standard reference on this important subject.

Menzie Chinn

Professor of Public Affairs and Economics University of Wisconsin

Finally, a clear and insightful guide to global recessions and recoveries. And just in time, with the world trying to recover from its worst economic beating since the Great Depression. This book, written by two leading economists operating in the heart of Washington, will become the bible on global growth and collapse.

Nicholas Bloom

Professor of Economics Stanford University

For those who want to understand the evolving nature of global economic interactions, Collapse and Revival is a treasure of insights.

Kemal Dervis

Vice President of Global Economy and Development

The Brookings Institution

Economic cycles had long been the object of economic researchers and policymakers, prompting an entire industry of analysts trying to outdo each other in forecasting the next turn in a cycle. Then came the global financial crisis, which made crystal clear that forecasting economic activity without consideration of financial conditions can produce embarrassing results. This book, written while we are climbing out of a deep recession, is a must-read for any student of economic cycles. A big takeaway from the book is that economic recessions that coincide with financial crises are deeper and last longer. Let’s hope this message will not be forgotten the next time financial excesses are building up.

Luc Laeven

Director General of Research European Central Bank

Business cycles in general are only moderately synchronized across countries, but Kose and Terrones identify four episodes in the past half century that truly qualify as global recessions. The most notable are 1975 (oil prices) and 2009 (financial crisis). The authors perform an enormous social service in collecting a large number of economic indicators for a larger number of countries. An updated Burns-Mitchell “judgmental method” is then used to identify national and global recessions. Kose and Terrones find, among other things, that the 2009 recession was the most synchronized in their sample. Perhaps, they suggest, that accounts for the diverse patterns of recovery. It’s a fascinating study, one that rewards a closer look. And they leave us with an uplifting message: We recovered after each one.

David Backus

Heinz Riehl Professor Stern School of Business, New York University

The economic and financial crisis starting in 2008 has been a reminder of the need to better understand the dynamics of recessions and recoveries, as well as their increasing global nature. Collapse and Revival provides the most current analysis of these issues and it is a must-read for anyone who wants to have a good understanding of the current state of knowledge of what we know about economic crises, how they happen, how long it takes to recover from them, and how they spread across borders.

Antonio Fatas

The Portuguese Council Chaired Professor of European Studies and Professor of Economics, INSEAD

What are global recessions and recoveries? What are their causes and consequences? Why is the Great Recession different from previous episodes? What policies can prevent global recessions or mitigate their effects by kick-starting a recovery? In this important book, Ayhan Kose and Marco Terrones address these difficult questions with rigorous definitions, facts (lots of facts!), clear prose, and boxes for readers who want to know more about the technical details. The authors summarize what we know about these important phenomena and the book will become an essential resource for policymakers and practitioners who want to put in place policies that can protect us from these catastrophic events. Researchers will be interested in Kose and Terrones’ careful description of the available data, econometric methodology, and analysis of what we still don’t know about the causes and consequences of global recessions. I am sure that Collapse and Revival will be an important stepping stone for future research in this field. This is super cool stuff!

Ugo Panizza

Pictet Chair in Finance and Development The Graduate Institute, Geneva

This book is very timely. Written by two of the best experts in the field, it offers an excellent analysis of the causes of global recessions and recoveries. The authors document their main features and describe the events that take place around these episodes in a very accessible manner. A must-read for academics and policymakers alike.

Jakob de Haan

Head of Research of De Nederlandsche Bank and Professor of Political Economy, University of Groningen

Kose and Terrones have written an impressive book on global business cycles, which affect the lives of billions of people, and yet so far have been rather understudied and, unfortunately, not so well understood. Using a clear yet rigorous style, they explain what causes a recession and what makes it global, and also what drives the ensuing recovery. An in-depth analysis of four global recessions, and in particular the recent financial crisis, provides useful tools for understanding, anticipating, and mitigating the effects of future episodes.

Massimiliano Marcellino

Scientific Chair of the Euro Area Business Cycle Network and Professor of Econometrics, Bocconi University

Kose and Terrones provide a very useful volume aimed at substantially increasing our understanding of truly global recessions and recoveries. Collapse and Revival not only is a source of valuable background material on the four post–World War II global recessions but also carefully examines the technical issues in business cycle dating and analysis. The treatment of these issues is thorough. The lessons drawn for policy are well supported.

Edwin (Ted) M. Truman

Non-Resident Senior Fellow Peterson Institute for International Economics

Collapse and Revival is a seminal study on how to think about the cycles of the global economy, which is more multipolar and more integrated than in the past. The carefully conducted analysis and very useful insights provide an essential perspective for thinking about the current state of the global economy and the policies that are needed to cope with many economic and financial challenges we are facing. The notion that policymakers need to closely monitor the financial cycles in their macroeconomic surveillance is particularly important as it challenges the prevailing way that policymakers look at economies.

Stephen L. Jen

Managing Partner SLJ Macro Partners LLP

This book is a must-read for all students of business cycles. Thinking about economic fluctuations from a national perspective is clearly yesterday’s problem; Kose and Terrones have done an invaluable service to the profession by focusing on global fluctuations. Policymakers and academics alike will learn a lot from the clear vision of Kose and Terrones. Highly recommended!

Andrew Rose

Associate Dean and Chair of the Faculty Haas School of Business, University of California, Berkeley

Collapse and Revival is an excellent book. Kose and Terrones make sense of the 2009 global recession by systematically examining its causes and consequences in the context of other historical world recessions and downturns. To accomplish this task, they provide coherent objective definitions of global recessions and recoveries that are sure to be among the standards going forward. Their results provide evidence that global downturns, which have synchronous adverse implications for citizens across the globe, are not isolated events, but are sufficiently common to warrant continued attention by researchers.

Mark M. Spiegel

Vice President, International Research and Director Center for Pacific Basin Studies Federal Reserve Bank of San Francisco

This important and deeply innovative book provides invaluable insights into global recessions and recoveries. Kose and Terrones develop a comprehensive analysis of the main features of the global cycles, study the unique properties of the 2009 global recession and the subsequent recovery based on real-world data, and examine the complex interactions between global and national cycles. Understanding these concepts is extremely important for policy design. Collapse and Revival is a major contribution to the business cycle literature and to the current debates on policy design in a complex and rapidly changing world. It also opens new doors for future research in many fields of our discipline.

Ali Bayar

President of EcoMod Network and Research Professor Deutsches Institut für Wirtschaftsforschung

Ayhan Kose and Marco Terrones are two insightful scholars with plenty of policy experience. We have learned a lot about international macroeconomics and policies from them. Once again, they delight us with this thoughtful and relevant book. They analyze global recessions and recoveries that have taken place since 1960, drawing parallels and differences across them. The rigorous description as well as the discussion of policy implications are very important. Scholars and policymakers will gain a lot reading this book—an original and novel study of the global business cycle.

José De Gregorio

rofessor, Universidad de Chile and Peterson Institute for International Economics.

Finally! A cogent and yet highly accessible book about the “double whammies” of economic collapse and revival from all over the world and through recent history. Kose and Terrones not only deconstruct the antecedents of these boom-bust cycles, but they effectively describe their consequences, including the large and persistent human and social costs. The most important chapters emphasize the out-of-phase global and national business cycles and the worsening divergence across countries’ fiscal and monetary policies. Our politicians and policymakers better take heed of these lessons.

Andrew Karolyi

Professor of Finance Cornell University

During the short-lived era of the Great Moderation, much of the economics profession deluded themselves into thinking that the business cycle had been tamed in the advanced economies. As the Global Financial Crisis proved otherwise, the interest in studying the causes and varieties of economic cycles resurfaced in the United States, Europe, and elsewhere. This book is essential reading for those academics, policymakers, and market participants who are interested in gaining a better understanding of the booms and busts, and their milder counterparts, in the global economy. The study of business cycles has a rich history, famously connected to the pioneering work of Burns and Mitchell on the U.S. economy in the 1940s. However, the study of economic cycles in the developing world, which comprises a rapidly growing share of world GDP, has remained comparatively understudied. These authors importantly fill that gap and offer a comprehensive and insightful analysis of modern business cycles and that is truly global in scope.

Carmen M. Reinhart

Minos A. Zombanakis Professor of the International Financial System Harvard University

Although the global nature of business cycles has been acknowledged by both academics and policymakers, there has not been a comprehensive analysis of the complex interactions between global and regional business cycles. This book provides a thorough overview of the cause and nature of global business cycles in light of the recent global financial crisis. Collapse and Revival is a must-read for policymakers as well as students of business cycles, and I would also put this book at the top of the reading list for my students who take international economics courses.

Sunghyun Henry Kim

Professor, Sungkyunkwan University

This innovative book by Kose and Terrones offers a fresh perspective on international business cycles: rather than analyzing such cycles as shocks originating in a particular economy and transmitted internationally through various mechanisms, they consider the world economy as an integrated whole, treating it effectively as a single closed economy. This new global perspective is motivated by two relatively new features of the international economy: much greater integration, both real and financial, among its constituent parts, and the greater weight within the whole of emerging and developing countries, making such economies full participants in the evolution of international business cycles. This appealing perspective will undoubtedly cause us to reconsider how we think about the world economy, and calls in particular for hard thinking about the design of institutional mechanisms for responding to global shocks. The “stylized facts” about global business cycles documented in this book provide the indispensable background for such thinking.

Peter Montiel

Fairleigh S. Dickinson Jr. '41 Professor of Economics Williams College

The world economy is closely interlinked through trade and financial linkages. The book by Ayhan Kose and Marco Terrones expands our knowledge of global recessions and recoveries, which are critical for understanding fluctuations in national economies. Its discussion on the nature of global business cycles and the role of policy provide an important ingredient for scholars and policymakers to guide nations toward more stable and sustainable economic growth.

Jong-Wha Lee

Professor, Korea University and Former Chief Economist of the Asian Development Bank

A tour de force! The thorough analysis of dramatic global economic collapses presented in this book helps readers understand how major global downturns begin, evolve and get resolved. A must read for policymakers, academicians and all those interested to learn the lessons from the past that can help predict (and perhaps even avoid?) the next global contraction.

Liliana Rojas-Suarez

Senior Fellow Center for Global Development

Kose and Terrones masterfully condense their well-known research on international business and financial cycles in a multimedia book containing a wealth of data, analyses, and useful tools. Their book combines deep insight into the notion of a “world” business cycle with careful attention to the historical context, skillful use of state of the art research methods, and new multimedia capabilities. Collapse and Revival will be an invaluable resource for teaching MBAs, for practitioners scrutinizing the world economic horizon, and fellow scholars in the field on international business cycle research.

Alessandro Rebucci

Assistant Professor Johns Hopkins University Carey Business School

What happens when the global economy falls into recession and how does it recover? Kose and Terrones answer these and many other important questions in this comprehensive empirical study of Global Business Cycles. Their new book will be an indispensable resource for all serious students of the business cycle.

Mark Watson

Howard Harrison and Gabrielle Snyder Beck Professor of Economics and Public Affairs Princeton University

The events since 2007 have once again demonstrated how devastating global recessions could be. It is likely that such events will repeat in the future in a highly integrated world economy. Hence, understanding causes of global recessions and what drives global recoveries is essential. In this remarkable book, Ayhan Kose and Marco Terrones concentrate on these issues. Collapse and Revival presents great value to readers since it clearly has a say on these extremely important issues.

Fatih Özatay

Professor of Economics TOBB University of Economics and Technology and Economic Policy Research Foundation of Turkey (TEPAV)

Kose and Terrones, in this invaluable new work, aim to finally provide a workable definition of what “global recessions” and “global recoveries” are. They do so by systematically looking at the four episodes of global contraction and recovery since World War II. They include the last one—of which the European Union “Sovereign Debt Crisis” was a part, the most widespread and severe of those, and therefore dully called “Great Recession.” Even if global growth has now returned, Kose and Terrones also stress the fundamental lesson that economic cycles will always be with us, and that therefore the actions of policymakers should aim not only to “fight the last war” but also to increase resilience for that next economic crisis, which will inevitably come at some point.

Lucio Vinhas de Souza

Team Leader, Economics Team European Political Strategy Centre European Commission

A valuable and timely study…The authors expediently address critical issues that have a lot of relevance to today’s economic climate, helping us better understand global recessions, and the policy options available to expedite recoveries. We may know a lot about the individual economies but their intricate interaction at the global level clearly requires such deeper analysis. The plain language of the book makes it an easy and enjoyable read.

Murat Ulgen

Global Head of Emerging Markets Research HSBC

Kose and Terrones have written a monumental, pathbreaking, encyclopedic and readable book on global business cycles. It is a must-read for everyone interested in, or affected by, the contemporary business cycle and the global economy.

Allen Sinai

Chief Global Economist and Strategist

Decision Economics

Despite the voluminous literature on the Great Recession, there is a dearth of studies that provide a historical perspective on the causes of global (as opposed to national) downturns and subsequent recoveries. Kose and Terrones, with their careful and insightful study of the past four global recessions, admirably fill the lacuna. They have made a wonderful contribution by clarifying the basic concepts relating to global business cycles, and using a comprehensive database and findings from various branches of macroeconomic research, documenting their main features. The study provides a superb analysis of the broader economic and financial effects of global recessions and recoveries, interactions between global and national business cycles, efficacy of macroeconomic policies, and the lessons to be drawn from the different episodes. A must-read for policymakers, market participants, economists, and layman alike, especially given the concerns about a lurch into yet another global downturn. A remarkable, invaluable resource.

Manmohan Singh Kumar

Chief Economist, Global Growth Markets CDPQ

Since the financial crisis of 2007–09, the global economy has been in an uncharted territory, searching desperately to find its way out. The weak recovery in developed countries is now being threatened by the headwinds from emerging market economies. Considering these developments, this book by two leading researchers in the field is a very timely and important contribution to the literature. The authors provide a comprehensive framework to better understand global recessions and recoveries, especially after financial shocks on a global scale.

Kamil Yilmaz

Professor of Economics Koc University

Kose and Terrones have drawn on their years of experience in the international policy arena to write a book about the global business cycle that is comprehensive, rigorous, and accessible. Their analysis provides a framework for thinking about the Great Recession of 2009 in the context of previous recessions and addresses a number of interesting questions. What defines a global business cycle? In what sense was the most recent recession different from previous cyclical downturns? What factors can explain the depth of the most recent recession and the weakness of the recovery, and how much of that experience can be attributed to increased globalization? These questions are central to academics as well as to policymakers. Any student of business cycles, and any policymaker concerned with managing them, will find this both an instructive and an enjoyable read.

Linda Tesar

Professor of Economics University of Michigan

The Great Recession, Global Recessions, Global Recoveries. How can citizens of the world understand these terms when many, including often economists, just toss them around without defining them carefully? This book addresses this confusion head-on. It is a masterful, lucidly written, and easily accessible introduction to the subject of global recessions and recoveries. It explains how everybody gets affected by them and why citizens, and economists, should care about their definition and measurement. Importantly, it provides crucial lessons on how to reduce the chances of a global economic collapse and how to avoid anemic revivals. A highly recommended read.

Stijn Claessens

Senior Advisor, Federal Reserve Board and Professor of International Finance Policy, University of Amsterdam

In an age of declining barriers to global interaction, real and financial sectors are becoming increasingly integrated across the world. Economists are generally well equipped to study national business cycles, but what about worldwide trends? In the age of globalization, understanding worldwide developments is extremely important for all stakeholders, from policymakers to businesspeople. This comprehensive, insightful, and rigorous study teaches to track, analyze, and interpret global business cycles. Written by top scholars in the field, Collapse and Revival features a rich data review of business-cycle trends at all levels and presents established as well as novel empirical tools, including an interesting way of measuring global business cycles. It is easily accessible to a non technical audience and includes rich analysis of a wide variety of relevant topics. It is an excellent resource for economists, policymakers, and professionals working in the risk and finance fields.

Michael G. Plummer

Director, SAIS Europe, and Eni Professor of International Economics

Johns Hopkins University

This lucid and timely book fills important gaps in our thinking about how the global economy and markets really work. It is essential reading for policymakers, business leaders, and economists. In clear and jargon-free language, supported by excellent online and media resources, Collapse and Revival is an elegant and sophisticated exploration of how global recessions begin and end, two critical economic questions of our time. The authors, members of a new generation of global macroeconomists working at the frontiers of the profession, have made an outstanding contribution to the field.

Jean Pierre Lacombe

Chief Global Markets

Head of IFC Research

To Zeynep and Hüseyin

To Maria Teresa, Gianmarco, and Jasmine



At the heart of this book lie interactions with our many excellent coauthors and colleagues who greatly helped us in shaping our research on global recessions and recoveries. We are grateful to Kenneth Rogoff for his constant support of our research agenda. We are thankful to Nicholas Bloom and Prakash Loungani for their contributions to some of the background studies we produced together. We would like to thank Olivier Blanchard, Menzie Chinn, Stijn Claessens, Jörg Decressin, and Thomas Helbling for their detailed comments. We are grateful to Tamim Bayoumi, Charles Calomiris, José de Gregorio, Francis Diebold, Sandra Eickmeier, Alejandro Izquierdo, Massimiliano Marcellino, Enrique Mendoza, Adrian Pagan, Eswar Prasad, Alessandro Rebucci, Liliana Rojas-Suarez, Mark Spiegel, Gustavo Yamada, Kamil Yilmaz, Kei-Mu Yi, and participants at many conferences and seminars for useful suggestions on the preliminary drafts of some chapters. We owe a debt of gratitude to Ezgi Ozturk for outstanding research assistance. Bennet Voorhees provided excellent research support for some of the background studies.

We have been extremely lucky to work with a number of consummate professionals who were involved in the production process. We are thankful to Mark E. Felsenthal, Tracey Lookadoo, and Dana Vorisek for editorial assistance. We are indebted to Jeremy Clift, Gemma Diaz, Joanne Creary Johnson, Linda Griffin Kean, and Patricia C. Loo of the International Monetary Fund’s Communications Department for patiently coordinating the production process.

We would also like to thank the Multimedia Services Section of the IMF’s Technology and General Services Department, including video producer Dana Schiopu; video/photo project manager Nailah Fields; video editors Gokhan Karahan, Kris Rucinski, Bill Connell, and N’Namdi Washington; and Alex Curro, who handled the video archive. Dana Schiopu and Steve Jaffe were responsible for photography; and Gokhan Karahan, Kris Rucinski, and Alex Silver oversaw the video shoots.

The views expressed in this book are our own and do not necessarily represent the views and policies of the institutions with which we are affiliated.

About the Authors

M. Ayhan Kose is Director of the World Bank Group’s Development Prospects Group. He was previously Assistant to the Director of the Research Department at the IMF. He has published extensively in leading academic and policy-oriented outlets. He holds a PhD in economics from the Tippie College of Business of the University of Iowa.

Marco E. Terrones is a Deputy Division Chief in the Research Department of the International Monetary Fund. He has published in top journals, several collected volumes, and the IMF’s World Economic Outlook. His work has been featured in prominent media outlets. He holds a PhD in economics from the University of Wisconsin at Madison.


About This Book

Much has been written about economic setbacks at the national level. Yet our understanding of globally destructive economic events remains limited. The events of the past eight years have made this evident: the 2008–09 global financial crisis came largely as a surprise, and there was no clear consensus about the appropriate response to either the painful recession generated by the crisis or the sluggish recovery that followed. This book seeks to fill that unfortunate void.

Recessions can be devastating events and can have protracted effects. The world is still recovering from the most recent one—dubbed the Great Recession because of its scale and global reach. What makes a recession a truly global event? What causes a worldwide downturn? Why was the most recent global recession as severe as it was, and does the increasing interconnectedness of the world economy mean that such synchronized events are more likely in the future? What lessons can guide policymakers and scholars in the future?

Ayhan Kose and Marco Terrones seek to answer these questions. To aid our understanding of globally catastrophic economic events, they first clarify key concepts. They define what makes a recession global and identify four such episodes: 1975, 1982, 1991, and 2009. They track the global business cycle through the collapses associated with these global recessions and back to the global recoveries that ensued.

How This Book is Organized

Part I sets the stage by defining critical terms—most important, global recession and recovery—and by outlining the authors’ methodology. Part II studies the four worldwide recession episodes, including what lay behind the collapses and how the revivals unfolded. Part III puts the 2009 episode under a microscope to examine why its reverberations were so widely felt and why the recovery has been so anemic. Part IV analyzes global recessions in the context of global business cycles and draws lessons for policymakers and scholars. A series of appendices offer in-depth information on the country-specific effects of global recessions, including a detailed timeline, excerpts taken from the media articles covering these historical events, and summaries of relevant academic studies.

About the Multimedia Content

The digital editions of this book are supplemented by a variety of audiovisual materials that provide real-world examples and background to help readers better understand the full impact of global recessions on people’s lives. Access to the digital content is available on the enclosed DVD and on this website: The supplementary material includes an interactive timeline of the four global recessions, an overview video about the findings of the book, video interviews with the authors, detailed analysis of the impact of global crises in various geographic regions, and video coverage of the 2008–09 global financial crisis.

Only by understanding the factors behind global recessions can we forge better tools to predict them, mitigate their adverse effects, and promote healthy recoveries. This innovative and comprehensive book is a fundamental step toward improving our understanding of these devastating events.

Icons Used in This Book

The icons below are used to indicate the availability online or on the enclosed DVD of related audiovisual materials. These are hyperlinked in digital editions of this book.

VIDEO: Included are video interviews with the authors, detailed analysis of the impact of the crises in various geographic regions, and media coverage and analysis of the global financial crisis sparked by the collapse of U.S. investment bank Lehman Brothers.

AUDIO: Included are speeches and comments about global crises.

TIMELINE: An interactive timeline focuses on each specific global recession: 1975, 1982, 1991, and 2009.

Information about and access to digital content associated with this book are available at:

    Other Resources Citing This Publication