IDEAS home Printed from https://ideas.repec.org/a/bla/ecinqu/v56y2018i2p761-798.html
   My bibliography  Save this article

Financial Crises, Output Losses, And The Role Of Structural Reforms

Author

Listed:
  • Albi Tola
  • Sébastien Waelti

Abstract

Financial crises take a heavy toll on output growth. We assess the role of structural reforms in reducing the output losses resulting from financial crises across advanced economies, emerging and developing economies, and low‐income developing economies. We also revisit the role of macroeconomic policies in this context. The impact of crises on output growth differs between types of crises and economies, thus warranting sample splits along these lines. Some but not all reforms and policies help to reduce the output losses of crises in the medium term, highlighting the need not to overgeneralize the effectiveness of reforms and policies. Further research is warranted to further explore the heterogeneity in the impact of financial crises on output growth and to better understand when and how specific structural reforms and macroeconomic policies can mitigate the output costs of financial crises. (JEL E32, E44, E63, G28, O47)

Suggested Citation

  • Albi Tola & Sébastien Waelti, 2018. "Financial Crises, Output Losses, And The Role Of Structural Reforms," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 761-798, April.
  • Handle: RePEc:bla:ecinqu:v:56:y:2018:i:2:p:761-798
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ecin.12538
    Download Restriction: no

    References listed on IDEAS

    as
    1. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    2. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency Crashes in Emerging Markets: Empirical Indicators," Center for International and Development Economics Research (CIDER) Working Papers 233424, University of California-Berkeley, Department of Economics.
    3. Òscar Jordà, 2005. "Estimation and Inference of Impulse Responses by Local Projections," American Economic Review, American Economic Association, vol. 95(1), pages 161-182, March.
    4. Frankel, Jeffrey A. & Rose, Andrew K., 1996. "Currency crashes in emerging markets: An empirical treatment," Journal of International Economics, Elsevier, vol. 41(3-4), pages 351-366, November.
    5. Coen N. Teulings & Nikolay Zubanov, 2014. "Is Economic Recovery A Myth? Robust Estimation Of Impulse Responses," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 29(3), pages 497-514, April.
    6. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    7. Furceri, Davide & Zdzienicka, Aleksandra, 2012. "Banking Crises and Short and Medium Term Output Losses in Emerging and Developing Countries: The Role of Structural and Policy Variables," World Development, Elsevier, vol. 40(12), pages 2369-2378.
    8. Dave Reifschneider & William Wascher & David Wilcox, 2015. "Aggregate Supply in the United States: Recent Developments and Implications for the Conduct of Monetary Policy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 63(1), pages 71-109, May.
    9. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2011. "When Is the Government Spending Multiplier Large?," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 78-121.
    10. Valerie Cerra & Ugo Panizza & Sweta C. Saxena, 2013. "International Evidence On Recovery From Recessions," Contemporary Economic Policy, Western Economic Association International, vol. 31(2), pages 424-439, April.
    11. Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2013. "When Credit Bites Back," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(s2), pages 3-28, December.
    12. Hutchison, Michael M. & Noy, Ilan & Wang, Lidan, 2010. "Fiscal and monetary policies and the cost of sudden stops," Journal of International Money and Finance, Elsevier, vol. 29(6), pages 973-987, October.
    13. Luc Laeven & Fabián Valencia, 2013. "Systemic Banking Crises Database," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 61(2), pages 225-270, June.
    14. Jay C. Shambaugh, 2004. "The Effect of Fixed Exchange Rates on Monetary Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 301-352.
    15. Duval, Romain, 2008. "Is there a role for macroeconomic policy in fostering structural reforms? Panel evidence from OECD countries over the past two decades," European Journal of Political Economy, Elsevier, vol. 24(2), pages 491-502, June.
    16. Alessandro Prati & Massimiliano Gaetano Onorato & Chris Papageorgiou, 2013. "Which Reforms Work and under What Institutional Environment? Evidence from a New Data Set on Structural Reforms," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 946-968, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecinqu:v:56:y:2018:i:2:p:761-798. 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: (Wiley Content Delivery). General contact details of provider: http://edirc.repec.org/data/weaaaea.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.