The Global Financial Crisis: How Similar? How Different? How Costly?

34 Pages Posted: 23 Mar 2010  

Stijn Claessens

Bank for International Settlements; University of Amsterdam - Finance Group; Centre for Economic Policy Research (CEPR); Tinbergen Institute; European Corporate Governance Institute (ECGI)

M. Ayhan Kose

Development Prospects Group at the World Bank

Marco E. Terrones

International Monetary Fund (IMF)

Date Written: March 17, 2010

Abstract

This paper provides a brief analysis of three major questions raised in the context of the recent global financial crisis. First, how similar is the crisis to previous episodes? We argue that the crisis featured some close similarities to earlier ones, including the presence of credit and asset price booms fueled by rapid debt accumulation. Second, how different is it from earlier episodes? We show that, as much as it displayed some similarities with previous cases, it also featured some significant differences, such as the explosion of opaque and complex financial instruments in a context of highly integrated global financial markets. Third, how costly are recessions that followed these types of crises? Although the latest episode took a very heavy toll on the real economy, we argue that this was not a surprising outcome. In particular, historical comparisons indicate that recessions associated with periods of deep financial disruptions result in much larger declines in real economic activity. We discuss the implications of these findings for economic and financial sector policies and future research.

Keywords: Global financial crisis, Similarities, Differences, Cost, Recessions

JEL Classification: E32, E44, E51, F42

Suggested Citation

Claessens, Stijn and Kose, M. Ayhan and Terrones, Marco E., The Global Financial Crisis: How Similar? How Different? How Costly? (March 17, 2010). Available at SSRN: https://ssrn.com/abstract=1573958 or http://dx.doi.org/10.2139/ssrn.1573958

Stijn Claessens

Bank for International Settlements ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

University of Amsterdam - Finance Group ( email )

Roetersstraat 18
Amsterdam, 1018 WB
Netherlands
+31 20 525 6020 (Phone)
+31 20 525 5285 (Fax)

HOME PAGE: http://www.fee.uva.nl/fm/index.htm

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

M. Ayhan Kose (Contact Author)

Development Prospects Group at the World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Marco E. Terrones

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4329 (Phone)

HOME PAGE: http://imf.org/external/np/CV/AuthorCV.aspx?AuthID=171

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