How Countries Get Out of A Recession
During a recession economic activity slows. Borrowing and lending stop due to the fact that people simply aren't willing to borrow or lend. The central bank cannot influence lending through it's usual means- by reducing interest rates, because commercial banks have a lot of bad debts on their books and are unwilling to lend to anyone since most people are not credit worthy anymore. Most people are not creditworthy because the prices of assets they would usually use as collateral have fallen and governments, individuals and corporations have stopped spending or are in the process of cutting their spending. Since one person's spending is another's income, when the economic players previously mentioned cut spending they essentially cut income for and among themselves. Profits to corporations fall, corporations let people go or cut wages to workers, and taxes to government fall since tax is a function of profits and wages. If you think of a recession as a bell curve, banking crises happen at the peak of the curve. As the economy approaches a recession the central bank starts cutting interest rates to encourage borrowing because more borrowing equals more spending. For developed countries interest rates on a good day is around 3-5%. For emerging markets and developing countries it could be much more higher than that, ranging from about 7 to 20%. Regardless, at the peak of a recession the central bank would typically have used up its interest cutting leverage as interest rates would have been cut to zero or very close to zero leaving that machinery unusable. There are several ways to help the economy get back to running.
Government can borrow to spend and/or tax the rich
Commercial banks can restructure their debts
The central bank can print money
The first option is for the government to borrow from other countries or multilateral organizations such as the IMF and the World Bank. Normally government spending is financed by taxes, but since people and corporations are earning less or nothing, (in the case of the unemployed or bankrupt companies) tax income to the government reduces and the government needs to find other ways to get money to spend on social welfare programs. This is necessary because during recessions unemployment is high.
Since commercial banks now have an unhealthy amount of bad assets (the loans they have given out) on their books, they need to find a way to make collection more probable. They can do this by reducing the interest rate borrowers of old loans have to pay, by extending the length of time borrowers have to pay, or they can make an agreement with borrowers to only collect back a portion of the amount borrowed.
Finally and most necessarily, the central bank can print more money. Printing money is an easy way out of a recession since it happens at no cost. The central bank then uses the new money to buy government bonds and financial assets. This increases the amount of money the government has to spend and increases the value of assets borrowers can use as collateral, respectively. With the government's new money, they spend on productive activities and through this means money is distributed to the populace. Another thing the central bank can do with the new money is buy commercial banks' bad assets and pay the commercial banks amounts equal to the true value of the assets so that commercial banks have more money to lend.