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The Effect of Loss Experiences in a Banking Crisis on Future Expectations and Behavior

Author

Listed:
  • Mudd Shannon

    () (Haverford College)

  • Pashev Konstantin

    () (New Bulgarian University)

  • Valev Neven T

    () (Georgia State University)

Abstract

Surveys taken in Bulgaria in both 2008 and 2009 show that people who had experienced a loss during an earlier banking crisis are significantly more likely to expect a new crisis. This result holds despite more than a decade between the earlier crisis and the surveys as well as the dramatically improved performance and stability of both the financial sector and the economy in the meantime. The loss experience also affects behavior. People who experienced a loss in the earlier crisis were more likely to have withdrawn funds from bank deposits in the midst of the international banking crisis in 2009.

Suggested Citation

  • Mudd Shannon & Pashev Konstantin & Valev Neven T, 2010. "The Effect of Loss Experiences in a Banking Crisis on Future Expectations and Behavior," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-21, November.
    • Handle: RePEc:bpj:bejmac:v:10:y:2010:i:1:n:32
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    References listed on IDEAS

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    1. M. Berlemann & K. Hristov & Nikolay Nenovsky, 2002. "Lending of last resort, moral hazard and twin crises. Lessons from the Bulgarian financial crises 1996/1997," Post-Print halshs-00260052, HAL.
    2. Dobrinsky, Rumen, 2000. "The Transition Crisis in Bulgaria," Cambridge Journal of Economics, Oxford University Press, vol. 24(5), pages 581-602, September.
    3. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 717-737.
    4. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
    5. Calvo, Guillermo A, 1986. "Temporary Stabilization: Predetermined Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 94(6), pages 1319-1329, December.
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    Cited by:

    1. Thomas Scheiber & Caroline Stern, 2016. "Currency substitution in CESEE: why do households prefer euro payments?," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 73-98.
    2. Searing, Elizabeth A.M., 2013. "Love thy neighbor? Recessions and interpersonal trust in Latin America," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 68-79.
    3. Bracha Anat & Jamison Julian C., 2012. "Shifting Confidence in Homeownership: The Great Recession," The B.E. Journal of Macroeconomics, De Gruyter, vol. 12(3), pages 1-48, October.

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