On the severity of economic downturns: Lessons from cross-country evidence

We measure the severity of recessions as a function of their amplitude and duration. Within a quantile regression framework, we assess what causes economic downturns to be more or less severe. We find that the most severe downturns have striking similarities regarding cumulated domestic credit and large current account deficits.

► We compute the severity of downturns as a function of their amplitude and duration. ► The frequency and the severity of downturns increased during the last decade. ► Current account deficits precede the most severe crises. ► The increase of cumulated credit growth is also a precursor of severe recessions. ► Less virulent crises tend to be difficult to anticipate.