Real Effects of Banking Crises: A Survey of the Literature

33 Pages Posted: 16 May 2010  

Luisa Carpinelli

Bank of Italy

Date Written: September 18, 2009

Abstract

The literature is unanimous in highlighting that banking crises have a negative impact on GDP, usually more pronounced in developing economies. The magnitude of the losses is more controversial: the quantitative results of studies on the repercussions of banking crises on economic activity, in fact, are quite uneven. Estimates on the correlation between financial variables and GDP indicate output losses generally greater than ten percentage points of pre-crisis output and exhibit high variability, as a result of the large number of different methodologies adopted to measure real costs. The very high values thus obtained often reflect a problem in identifying the causal nexus between banking crises and real output fluctuations. The most recent literature, which examines the relevance of specific channels of transmission based on individual data, tends to produce a lower estimate of the direct causal effects of banking crises, which are rarely found to cause an output loss exceeding 2 per cent.

Notes: Downloadable document is in Italian.

Keywords: banking crises, real effects, transmission channesl, procyclicality

JEL Classification: G01, G21, E44, E51

Suggested Citation

Carpinelli, Luisa, Real Effects of Banking Crises: A Survey of the Literature (September 18, 2009). Bank of Italy Occasional Paper No. 55. Available at SSRN: https://ssrn.com/abstract=1606247 or http://dx.doi.org/10.2139/ssrn.1606247

Luisa Carpinelli (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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