Sustaining a Global Recovery

The recovery has started. Sustaining it will require delicate rebalancing acts, both within and across countries


In normal recessions, however disruptive they are to businesses and jobs, things turn around predictably. The current global recession is far from normal.

Usually, to fight a recession, the central bank lowers interest rates, which results in increased demand and output. People resume buying durable goods such as appliances and cars. Firms start delayed investment projects. Often, an exchange rate depreciation gives a boost to exports by making them cheaper. The lower-than-normal growth during the recession gives way to higher-than-normal growth for some time, until the economy has returned to its normal growth path.
But the world is not in a run-of-the mill recession. The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come.

http://www.imf.org/external/pubs/ft/fandd/2009/09/blanchardindex.htm