The myth of economic recovery: The case of crises in neighboring countries

Although there is evidence that there are economic spillovers from neighboring countries to the domestic economy, there has been lack of effort to discover the persistence of these effects. Using panel data for a large set of countries, I ask whether the effect of crises in neighboring countries on the domestic output is long lasting. I show that different sorts of political and financial crises in neighboring countries have a highly persistent impact on the domestic output with no evidence for recovery.