Financial Crises, Investment Slumps, and Slow Recoveries

One of the most puzzling facts in wake Global Financial Crisis (GFC) is that output across advanced and emerging economies recovered at a much slower rate than anticipated by forecasting agencies. This paper delves into mechanics behind observed slow recovery associated permanent losses aftermath crisis, with particular focus on role played financial frictions investment dynamics. The provides two main contributions. First, we empirically document lower during crises key factor leading to loss total productivity (TFP) crisis. Second, develop DSGE model capital-embodied technological change capable reproducing empirical facts. We also evaluate policies stabilizing TFP response disruptions markets.