Citation

Discussion Paper Details

Please find the details for DP5088 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: The Real Effect of Banking Crises

Author(s): Giovanni DellAriccia, Enrica Detragiache and Raghuram G Rajan

Publication Date: May 2005

Keyword(s): bank lending channel and banking crises

Programme Area(s): Financial Economics

Abstract: Banking crises are usually followed by a decline in credit and growth. Is this because crises tend to take place during economic downturns, or do banking sector problems have independent negative effects on the economy? To answer this question we examine industrial sectors with differing needs for financing. If banking crises have an exogenous detrimental effect on real activity, then sectors more dependent on external finance should perform relatively worse during banking crises. The evidence in this paper supports this view. Additional support comes from the fact that sectors that predominantly have small firms, and thus are typically bank dependent, also perform relatively worse during banking crises. The differential effects across sectors are stronger in developing countries, in countries with less access to foreign finance, and where banking crises were more severe.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5088

Bibliographic Reference

DellAriccia, G, Detragiache, E and Rajan, R. 2005. 'The Real Effect of Banking Crises'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=5088