Abstract

http://ssrn.com/abstract=1985237
 
 

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The Consequences of Banking Crises for Public Debt


Davide Furceri


Organization for Economic Co-Operation and Development (OECD); University of Palermo - Istituto di Economia Politica

Aleksandra Zdzienicka


University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

March 25, 2010

Bank of Italy Occasional Paper

Abstract:     
The aim of this paper is to assess the consequences of banking crises for public debt. Using an unbalanced panel of 154 countries from 1980 to 2006, the paper shows that banking crises are associated with a significant and long-lasting increase in government debt. The effect is a function of the severity of the crisis. In particular, we find that for severe crises, comparable to the most recent one in terms of output losses, banking crises are followed by a medium-term increase of about 37 percentage points in the government gross debt-to-GDP ratio. We also find that the debt ratio increased more in countries with a worse initial fiscal position (in terms of the gross debt to GDP ratio) and with a higher share of foreign debt.

Number of Pages in PDF File: 22

Keywords: Output Growth, Financial Crisis, CEECs

JEL Classification: G1, E6

working papers series





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Date posted: January 15, 2012  

Suggested Citation

Furceri, Davide and Zdzienicka, Aleksandra, The Consequences of Banking Crises for Public Debt (March 25, 2010). Bank of Italy Occasional Paper. Available at SSRN: http://ssrn.com/abstract=1985237 or http://dx.doi.org/10.2139/ssrn.1985237

Contact Information

Davide Furceri (Contact Author)
Organization for Economic Co-Operation and Development (OECD) ( email )
2 rue Andre Pascal
Paris Cedex 16, 75775
France
University of Palermo - Istituto di Economia Politica ( email )
Viale delle Scienze
Palermo, 90100
Italy
Aleksandra Zdzienicka
University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )
93, chemin des Mouilles
Ecully, 69130
France
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