The IMF released several chapters of the World Economic Outlook; one chapter entitled Financial Stress and Economic Downturns provides some insights into the ramifications of the current financial turmoil.

Figure 4.7 from WEO (Oct. 2008). Notes: Sources: Haver Analytics; OECD, Analytic Database; OECD, Economic Outlook (2008); and IMF staff calculations. The difference between banking-related and non-banking-related episodes is significant at a minimum of 10 percent for quarters 0, 1, 2, 3, and 4. The sample is constant for all quarters. The difference between slowdowns preceded by banking-related financial stress and slowdowns not preceded by financial stress is significant at a minimum of 10 percent for t - 6 to t + 6. The sample is constant for all quarters.

So financial stress before a recession presages a statistically significantly more severe recession; the fact that it's a banking type of financial stress (as opposed

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