A tale of three countries: recovery after banking crises
AbstractThree small, open European economies â?? Iceland, Ireland and Latvia â?? experienced serious trouble during the global financial crisis. Behind their problems were rapid credit growth and expansion of other banking activities in the years leading up to the crisis, largely financed by international borrowing. The crisis hit Latvia harder than any other country, and Ireland also suffered heavily, while Iceland exited the crisis with the smallest fall in employment, despite the greatest shock to the financial system. The purpose of this Policy Contribution is to compare the policy responses in, and the adjustments made by, the three countries. Based on this comparison, it draws lessons for exchange rate policy, internal devaluation, capital controls, banking sector restructuring and fiscal consolidation. It makes a strong case for a European banking federation.
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Bibliographic InfoPaper provided by Bruegel in its series Policy Contributions with number 663.
Date of creation: Dec 2011
Date of revision:
Other versions of this item:
- Zsolt Darvas, 2011. "A Tale of Three Countries: Recovery after Banking Crises," Working Papers 1106, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.
- Zsolt Darvas, 2012. "A Tale of Three Countries: Recovery after Banking Crises," IEHAS Discussion Papers 1202, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-10 (All new papers)
- NEP-BAN-2012-01-10 (Banking)
- NEP-EEC-2012-01-10 (European Economics)
- NEP-FDG-2012-01-10 (Financial Development & Growth)
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