Discussion Paper Details

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Title: Financial Crises and Economic Activity

Author(s): Stephen G Cecchetti, Marion Kohler and Christian Upper

Publication Date: November 2009

Keyword(s): Cost of Crisis, Crises, Output loss, Recovery and Systemic Banking Crisis

Programme Area(s): International Macroeconomics

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.

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Bibliographic Reference

Cecchetti, S, Kohler, M and Upper, C. 2009. 'Financial Crises and Economic Activity'. London, Centre for Economic Policy Research.