The Real Output Costs of Financial Crisis: A Loss Distribution Approach
AbstractWe study cross-country GDP losses due to financial crises in terms of frequency (number of loss events per period) and severity (loss per occurrence). We perform the Loss Distribution Approach (LDA) to estimate a multi-country aggregate GDP loss probability density function and the percentiles associated to extreme events due to financial crises. We find that output losses arising from financial crises are strongly heterogeneous and that currency crises lead to smaller output losses than debt and banking crises. Extreme global financial crises episodes, occurring with a one percent probability every five years, lead to losses between 2.95% and 4.54% of world GDP.
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Bibliographic InfoPaper provided by Banco Central de Reserva del Perú in its series Working Papers with number 2012-013.
Date of creation: May 2012
Date of revision:
Financial Crisis; Severity; Frequency; Loss Distribution Approach;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- G01 - Financial Economics - - General - - - Financial Crises
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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