Financial Crises and Economic Activity

40 Pages Posted: 17 Nov 2009

See all articles by Stephen G. Cecchetti

Stephen G. Cecchetti

Brandeis International Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Marion Kohler

Bank for International Settlements (BIS)

Christian Upper

Bank for International Settlements (BIS)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2009

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.

Keywords: Cost of Crisis, Crises, Output loss, Recovery, Systemic Banking Crisis

JEL Classification: E32, E44, G01

Suggested Citation

Cecchetti, Stephen G. and Kohler, Marion and Upper, Christian, Financial Crises and Economic Activity (October 2009). CEPR Discussion Paper No. DP7495, Available at SSRN: https://ssrn.com/abstract=1507492

Stephen G. Cecchetti (Contact Author)

Brandeis International Business School ( email )

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National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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212-720-8629 (Phone)
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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

Marion Kohler

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Christian Upper

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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