Conversely, when asset values fall, deleveraging occurs as the value of existing collateral declines, with negative implications for the real economy. Related to this is the work of Reinhart and Rogoff in their book “This time is different” where they show that the recovery from a financial crisis takes much longer than that of other crises.
Unlike normal economic cycles or recessions, financial crises are protracted. According to their research, conventional recessions involve a relatively quick return to normalcy, and generally the economy makes up the lost output and resumes its pre-recession growth trend within a year.