This paper examines the growth dynamics of countries, focusing on whether economic contractions are followed by fast recoveries. Using panel data from a large number of countries, the authors find that economic contractions are not followed by offsetting fast recoveries. Trend output is not regained on average. Wars, crises, and other negative shocks lead to absolute divergence and lower long-run growth, whereas expansions show absolute convergence. The output costs of political and financial crises are permanent on average, and long-term growth is negatively linked to volatility. These results imply that panel data studies can help identify the sources of growth and that economic models should be capable of explaining growth and fluctuations within the same framework. The paper investigates whether countries recover from their crises, shocks, and downturns. It finds that output losses from crises are not fully reversed, leading to permanent output losses and long-term divergence in income levels. The paper also discusses the implications of these findings for understanding the determinants of growth and the role of volatility. It highlights the importance of considering the persistence of shocks and the impact of crises on long-term growth. The paper concludes that economic models should account for the long-term effects of crises and the role of volatility in shaping growth outcomes. The findings suggest that political and financial crises can have lasting negative impacts on growth, and that institutions and policies need to be transformed to achieve stability and long-term growth. The paper also emphasizes the importance of using panel data to analyze growth and volatility, as well as the need to consider the persistence of shocks in economic models.This paper examines the growth dynamics of countries, focusing on whether economic contractions are followed by fast recoveries. Using panel data from a large number of countries, the authors find that economic contractions are not followed by offsetting fast recoveries. Trend output is not regained on average. Wars, crises, and other negative shocks lead to absolute divergence and lower long-run growth, whereas expansions show absolute convergence. The output costs of political and financial crises are permanent on average, and long-term growth is negatively linked to volatility. These results imply that panel data studies can help identify the sources of growth and that economic models should be capable of explaining growth and fluctuations within the same framework. The paper investigates whether countries recover from their crises, shocks, and downturns. It finds that output losses from crises are not fully reversed, leading to permanent output losses and long-term divergence in income levels. The paper also discusses the implications of these findings for understanding the determinants of growth and the role of volatility. It highlights the importance of considering the persistence of shocks and the impact of crises on long-term growth. The paper concludes that economic models should account for the long-term effects of crises and the role of volatility in shaping growth outcomes. The findings suggest that political and financial crises can have lasting negative impacts on growth, and that institutions and policies need to be transformed to achieve stability and long-term growth. The paper also emphasizes the importance of using panel data to analyze growth and volatility, as well as the need to consider the persistence of shocks in economic models.