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Recoveries from recessions associated with a financial crisis tend to be sluggish. This paper presents evidence that stressed credit conditions are an important factor constraining the pace of recovery. In particular, using industry-level data, the author finds that industries relying more on external finance grow more slowly than other industries during recoveries from recessions associated with financial crises. Additional tests, based on establishment size, on alternative definitions of financial crises, and on corporate-government interest rate spreads, support the findings.
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