Author ORCID Identifier(s)

Jamel Saadaoui (0000-0003-1143-4480)

Published In

Journal of International Money and Finance

Document Type

Article

Publication Date

2-1-2026

Subjects

Recession, Recovery, Institutions, Political stability, Trade restrictions, Emerging economies

Abstract

The Global Financial Crisis and the COVID-19 pandemic were two major shocks to the world economy in the 21st century. In this study, we analyze the patterns of recessions and recoveries of 101 advanced and developing economies. We identify the turning points of recessions and expansions between 1990 and 2022, and perform cross-country analysis of domestic and external drivers of economic recovery. In addition to the standard independent variables, we include institutional development, political stability, the extent of democracy, and trade restrictions indexes, and explore their roles in explaining recessions and recovery patterns. For the whole sample, we find that deeper recessions are followed by stronger recoveries, in line with Friedman’s plucking model of the business cycle. However, the empirical evidence for the plucking model becomes weaker if institutional development is limited and trade restrictions are high. We show that recessions that create conflict and trade tensions differ sharply from those that do not, a relevant finding in the current global climate of heightened trade tensions and geopolitical uncertainty. Finally, since developing countries tend to have weaker institutions and higher trade barriers, our evidence suggests that countercyclical monetary and fiscal policy will have to play a bigger role in cushioning global shocks in those countries. This, in turn, requires more robust and credible monetary and fiscal policy frameworks.

Rights

Copyright (c) 2025 The Authors Creative Commons License This work is licensed under a Creative Commons Attribution 4.0 International License.

DOI

10.1016/j.jimonfin.2025.103504

Persistent Identifier

https://archives.pdx.edu/ds/psu/44415

Publisher

Elsevier BV

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Included in

Economics Commons

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