The Effect of Financial Crises on Potential Output: New Empirical Evidence from OECD Countries

This file is part of IDEAS, which uses RePEc data

The Effect of Financial Crises on Potential Output: New Empirical Evidence from OECD Countries

Author Info

Davide Furceri
Annabelle Mourougane

Additional information is available for the following registered author(s):

Abstract

The aim of this paper is to assess the impact of financial crises on potential output. For this purpose a univariate autoregressive growth equation is estimated on an unbalanced panel of OECD countries over the period 1960 to 2007. Our results suggest that the occurrence of a financial crisis negatively and permanently affects potential output. In particular, financial crises are estimated to lower potential output by around 1.5 to 2.4% on average. The magnitude of the effect increases with the severity of the crisis. The occurrence of a deep crisis is found to decrease potential output by nearly 4%, almost twice the amount observed for the average of crises. These results are robust to the use of an alternative measure of potential output, changes in the methodology and in the sample periods.

L’effet des crises financières sur la production potentielle : nouvelle analyse empirique sur les pays de l’OCDE
L’objectif de ce papier est d’estimer l’effet des crises financières sur la production potentielle. A cette fin, une équation de croissance univariée est estimée sur un panel non cylindré de données sur les pays de l’OCDE sur la période 1960-2007. Nos analyses suggèrent que l’occurrence d’une crise affecte négativement et de façon persistante la production potentielle. En particulier, les crises financières diminueraient d’après nos estimations la production potentielle d’environ 1.5 à 2.4% en moyenne. L’amplitude de cet effet augmente avec la sévérité de la crise. L’éclatement d’une crise profonde est estimé réduire la production potentielle d’un peu moins de 4%, presque deux fois la taille de l’effet moyen observé sur les crises. Ces résultats sont robustes à l’utilisation d’une mesure alternative de la production potentielle, à des changements dans la méthodologie et dans la période d’estimation.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

Publisher Info
Paper provided by OECD, Economics Department in its series OECD Economics Department Working Papers with number 699.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 19 May 2009
Date of revision:
Handle: RePEc:oec:ecoaaa:699-en

Contact details of provider:
Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
Email:
Web page: http://www.oecd.org
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: ().

Find related papers by JEL classification:
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
H10 - Public Economics - - Structure and Scope of Government - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-06-10 (All new papers)
NEP-MAC-2009-06-10 (Macroeconomics)

Statistics

Access and download statistics

Did you know? IDEAS uses the data collected within the RePEc project, the largest online bibliographic database in Economics.

This page was last updated on 2009-11-23.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.