What’s the Damage? Medium-term Output Dynamics After Banking Crises

 
Author/Editor: Abiad, Abdul ; Balakrishnan, Ravi ; Koeva Brooks, Petya ; Leigh, Daniel ; Tytell, Irina
 
Publication Date: November 01, 2009
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper investigates the medium-term behavior of output following banking crises, and its association with pre- and post-crisis conditions and policies. We find that output tends to be depressed substantially following banking crises, with no rebound to the precrisis trend. However, growth does eventually tend to return to its precrisis rate, with substantial crosscountry variation in outcomes. The depressed path of output typically results from reductions of roughly equal proportions in the employment rate, the capital-to-labor ratio, and total factor productivity. Initial conditions that are strongly associated with medium-run output losses include the short-run change in output, the occurrence of a joint banking-and-currency crisis, and a high precrisis level of investment. Short-run fiscal and monetary stimulus is associated with smaller medium-run deviations of output and growth from the precrisis trend.
 
Series: Working Paper No. 09/245
Subject(s): Asset management | China, People's Republic of | Governance | Investment policy | Pension funds | Pension supervision | Savings promotion

Author's Keyword(s): Financial crises | output growth | macroeconomic policy
 
English
Publication Date: November 01, 2009
Format: Paper
Stock No: WPIEA2009245 Pages: 37
Price:
US$18.00 (Academic Rate:
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