Discussion Paper Details

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Title: Financial Crises: Explanations, Types, and Implications

Author(s): Stijn Claessens and Ayhan Kose

Publication Date: February 2013

Keyword(s): asset booms, banking crises, credit booms, crises prediction, currency crises, debt crises, defaults, financial restructuring, policy implications and Sudden stops

Programme Area(s): Financial Economics

Abstract: This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises?currency crises, sudden stops, debt crises, and banking crises?and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

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Bibliographic Reference

Claessens, S and Kose, A. 2013. 'Financial Crises: Explanations, Types, and Implications '. London, Centre for Economic Policy Research.