3 describes the definition and the nature of credit-less and credit-with events in our sample, and then the results of the econometric analysis on the determinants of a credit-less recovery are discussed in the subsequent section. Section V assesses the prediction performance of the estimated model and the role of macroeconomic policy indicators. Concluding remarks follow.

# **II. Literature Review**

The literature that tries to capture whether or not economic recoveries occur together or without pick-ups in credit can be divided into three categories based on the type of data used in such analysis―macro (country-level) data, industry-level data, and firm-level data.

# _Country-level data_

Calvo _et al_ . (2006) use data for 31 emerging market economies that are integrated into the global capital markets over the period of 1980–2004 and look at output contractions and their recovery patterns after systemic sudden stops. They identify 22 output collapse episodes and find that, on average, although quick V-shaped recoveries are typically observed after a crisis, they are associated with weak investment pick-ups and virtually no domestic and external credit recoveries.<sup>2</sup> The study characterizes these recovery patterns as “Phoenix Miracles.” Huntley (2008) considers the same 22 collapse episodes and investigates their characteristics further. The author argues that the distribution of recovery speed is bimodal, showing that economies recover in five years or less in 12 episodes, while in most of the remaining 10 episodes it takes more than 15 years to return to the pre-crisis levels of GDP output. This paper also argues that investment accounts for the largest share of output recoveries and fast recoveries tend to occur together with recovering banking sectors that fund investment through domestic savings. Using the same data as in Calvo _et al_ . (2006), Biggs _et al_ . (2009) argue that it is the flow, not the stock, of credit what impacts the recovery. They model the relationship between credit and growth and show that the flow of credit is correlated with growth in domestic demand after a financial crisis.

Claessens _et al_ . (2009b) use quarterly data for 21 member countries of the Organization for Economic Co-operation and Development (OECD) over the period of 1960Q1–2007Q4 and examine how financial markets behave during recessions. This study focuses on credit crunches (measured by changes in the volume of real credit), house price busts and equity price busts. The authors identify 122 recessions of which 81 episodes are related to credit crunches and busts. Specifically, 21, 33 and 47 recession episodes are associated, respectively, with credit crunches, house price busts and equity price busts (including combinations of either two or three of these phenomena); 41 recessions cannot be attributed to either of these three phenomena. The paper’s focus is on the duration and depth of recessions. They find that a recession typically lasts for four quarters with an output decline of 2 percent and show that credit growth slows down before and during the recession and remains below the pre-recession level for at least three years after the onset of the recession. By arguing that credit crunches start three quarters before the beginning

> 2 The study finds a total of 33 output contractions, but 11 episodes are, by definition, categorized as mild recessions.  In the same vein, Zarazaga (2006) focuses on a crisis in Argentina in 2002 and discusses that V-shaped recoveries in output, investment and labor input are not miracles but what would be predicted by a neoclassical growth model with TFP as an exogenous factor.