Advanced Search
MyIDEAS: Login to save this paper or follow this series

Larger crises cost more: impact of banking sector instability on output growth

Contents:

Author Info

  • Serwa, Dobromił

Abstract

We propose a method for calculating the macroeconomic costs of banking crises that controls for the downward impact of recessions on banking activity. In contrast to earlier research, we estimate the cost of crises based on the size of banking crises. The extent of a crisis is measured using banking sector aggregates. The results, based on our method and data from over 100 banking crises, suggest that the size of a crisis matters for economic growth. Lower credit, deposit and money growth during crises cause GDP growth to decline.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. 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.
File URL: http://mpra.ub.uni-muenchen.de/5101/
File Function: original version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/7804/
File Function: revised version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5101.

as in new window
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:pra:mprapa:5101

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: banking crises; costs; output growth; event-study;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. James H. Stock & Mark W. Watson, 1994. "Evidence on structural instability in macroeconomic times series relations," Working Paper Series, Macroeconomic Issues, Federal Reserve Bank of Chicago 94-13, Federal Reserve Bank of Chicago.
  2. Calza Alessandro & Sousa João, 2006. "Output and Inflation Responses to Credit Shocks: Are There Threshold Effects in the Euro Area?," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 10(2), pages 1-21, May.
  3. Dell''Ariccia, Giovanni & Detragiache, Enrica & Rajan, Raghuram G, 2005. "The Real Effect of Banking Crises," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5088, C.E.P.R. Discussion Papers.
  4. Romain Ranciere & Aaron Tornell & Frank Westermann, 2005. "Systemic Crises and Growth," CESifo Working Paper Series 1451, CESifo Group Munich.
  5. Atanasova Christina, 2003. "Credit Market Imperfections and Business Cycle Dynamics: A Nonlinear Approach," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, De Gruyter, vol. 7(4), pages 1-22, December.
  6. Glenn Hoggarth & Ricardo Reis & Victoria Saporta, 2001. "Costs of banking system instability: some empirical evidence," Bank of England working papers, Bank of England 144, Bank of England.
  7. Honohan, Patrick & Klingebiel, Daniela, 2000. "Controlling the fiscal costs of banking crises," Policy Research Working Paper Series 2441, The World Bank.
  8. Robert J. Barro, 2001. "Economic Growth in East Asia Before and After the Financial Crisis," NBER Working Papers 8330, National Bureau of Economic Research, Inc.
  9. Psaradakis, Zacharias & Ravn, Morten O. & Sola, Martin, 2003. "Markov Switching Causality and the Money-Output Relationship," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3803, C.E.P.R. Discussion Papers.
  10. Love, Inessa & Preve, Lorenzo A. & Sarria-Allende, Virginia, 2005. "Trade credit and bank credit : evidence from recent financial crises," Policy Research Working Paper Series 3716, The World Bank.
  11. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, Elsevier, vol. 51(8), pages 1553-1575, November.
  12. Donald W.K. Andrews, 1997. "Consistent Moment Selection Procedures for Generalized Method of Moments Estimation," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1146R, Cowles Foundation for Research in Economics, Yale University.
  13. Loayza, Norman & Ranciere, Romain, 2004. "Financial development, financial fragility, and growth," Policy Research Working Paper Series 3431, The World Bank.
  14. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, American Economic Association, vol. 98(1), pages 439-57, March.
  15. Edward J. Frydl, 1999. "The Length and Cost of Banking Crises," IMF Working Papers 99/30, International Monetary Fund.
  16. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  17. Sweta Chaman Saxena & Valerie Cerra, 2005. "Growth Dynamics," IMF Working Papers 05/147, International Monetary Fund.
  18. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1994. "The Financial Accelerator and the Flight to Quality," Working Papers, C.V. Starr Center for Applied Economics, New York University 94-24, C.V. Starr Center for Applied Economics, New York University.
  19. Ross Levine & Norman Loayza & Thorsten Beck, 2002. "Financial Intermediation and Growth: Causality and Causes," Central Banking, Analysis, and Economic Policies Book Series, Central Bank of Chile, in: Leonardo Hernández & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (S (ed.), Banking, Financial Integration, and International Crises, edition 1, volume 3, chapter 2, pages 031-084 Central Bank of Chile.
  20. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, Elsevier, vol. 49(6), pages 1603-1635, August.
  21. Michael M. Hutchison & Ilan Neuberger, . "How Bad Are Twins? Output Costs of Currency and Banking Crises," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 02-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  22. Ben S. Bernanke & Alan S. Blinder, 1988. "Credit, Money, and Aggregate Demand," NBER Working Papers 2534, National Bureau of Economic Research, Inc.
  23. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
  24. Aaron Tornell, 2005. "Systemic Crises and Growth (September 2006)," UCLA Economics Online Papers, UCLA Department of Economics 359, UCLA Department of Economics.
  25. Nathan S. Balke, 2000. "Credit and Economic Activity: Credit Regimes and Nonlinear Propagation of Shocks," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 344-349, May.
  26. Kroszner, Randall S. & Laeven, Luc & Klingebiel, Daniela, 2007. "Banking crises, financial dependence, and growth," Journal of Financial Economics, Elsevier, Elsevier, vol. 84(1), pages 187-228, April.
  27. Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund.
  28. Gupta, Poonam, 2005. "Aftermath of banking crises: Effects on real and monetary variables," Journal of International Money and Finance, Elsevier, Elsevier, vol. 24(4), pages 675-691, June.
  29. J. Brooke Willis, 1960. "Gross Flows Of Funds Through Mutual Savings Banks," Journal of Finance, American Finance Association, American Finance Association, vol. 15(2), pages 170-190, 05.
  30. Demirguc-Kunt, Asli & Detragiache, Enrica & Gupta, Poonam, 2000. "Inside the crisis : an empirical analysis of banking systems in distress," Policy Research Working Paper Series 2431, The World Bank.
  31. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  32. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
  33. Poonam Gupta, 2000. "Aftermath of Banking Crises," IMF Working Papers 00/96, International Monetary Fund.
  34. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 29-51, July.
  35. Andrea Bubula & Inci Ötker, 2002. "The Evolution of Exchange Rate Regimes Since 1990," IMF Working Papers 02/155, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Aizenman, Joshua & Noy, Ilan, 2013. "Macroeconomic adjustment and the history of crises in open economies," Journal of International Money and Finance, Elsevier, Elsevier, vol. 38(C), pages 41-58.
  2. Philip Wilms & Job Swank & Jakob de Haan, 2014. "Determinants of the real impact of banking crises: A review and new evidence," DNB Working Papers, Netherlands Central Bank, Research Department 437, Netherlands Central Bank, Research Department.
  3. Dumitriu, Ramona & Stefanescu, Răzvan, 2013. "Decizii strategice ale politicii monetare
    [Strategic decisions of the Monetary Policy]
    ," MPRA Paper 51242, University Library of Munich, Germany, revised 05 Nov 2013.
  4. Fernández, Ana I. & González, Francisco & Suárez, Nuria, 2013. "How do bank competition, regulation, and institutions shape the real effect of banking crises? International evidence," Journal of International Money and Finance, Elsevier, Elsevier, vol. 33(C), pages 19-40.
  5. Puspa Amri & Apanard P. Angkinand & Clas Wihlborg, 2011. "International comparisons of bank regulation, liberalization, and banking crises," Journal of Financial Economic Policy, Emerald Group Publishing, Emerald Group Publishing, vol. 3(4), pages 322-339, November.
  6. Lagoarde-Segot, Thomas & Leoni, Patrick L., 2013. "Pandemics of the poor and banking stability," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(11), pages 4574-4583.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:5101. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.