Are deep recessions followed by strong recoveries? Results for the G-7 countries
The hypothesis is examined that the severity of a recession favourably affects the rate of growth of output during the period immediately after the recession. Our empirical analysis is based on the behaviour of industrial output in the G-7 countries during the period 1960 to 1985. The depth of a recession, defined as the cumulative output loss between the peak and trough dates, is shown to be negatively correlated with growth in the first 12 months of the subsequent expansion.