Discussion paper

DP7495 Financial Crises and Economic Activity

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.


Cecchetti, S, M Kohler and (2009), ‘DP7495 Financial Crises and Economic Activity‘, CEPR Discussion Paper No. 7495. CEPR Press, Paris & London. https://cepr.org/publications/dp7495