Working Paper: CEPR ID: DP7495
Authors: Stephen G. Cecchetti; Marion Kohler; Christian Upper
Abstract: We study the output costs of 40 systemic banking crises since 1980. Most, but not all, crises in our sample coincide with a sharp contraction in output from which it took several years to recover. Our main findings are as follows. First, the current financial crisis is unlike any others in terms of a wide range of economic factors. Second, the output losses of past banking crises were higher when they were accompanied by a currency crisis or when growth was low at the onset of the crisis. When accompanied by a sovereign debt default, a systemic banking crisis was less costly. And, third, there is a tendency for systemic banking crises to have lasting negative output effects.
Keywords: cost of crisis; crises; output loss; recovery; systemic banking crisis
JEL Codes: E32; E44; G01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| systemic banking crises (F65) | significant contractions in output (E23) |
| banking crisis + currency crisis (G01) | greater output loss (C67) |
| banking crisis + sovereign debt default (F65) | less severe output loss (E23) |
| low growth preceding a crisis (E32) | exacerbated severity of contraction (E65) |
| systemic banking crises (F65) | lasting negative effects on GDP (F69) |