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The real effect of banking crises: Finance or asset allocation effects? Some international evidence

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  • Fernández, Ana I.
  • González, Francisco
  • Suárez, Nuria

Abstract

This paper analyzes whether the decline in economic growth that follows a banking crisis occurs because of a reduction in the amount of credit available (finance effect) or a worsening in the allocation of investable resources (asset allocation effect). We use a sample of more than 2500 industrial firms in 18 developed and developing countries that experienced 19 systemic banking crises between 1989 and 2007. The results indicate that banking crises negatively affect firms’ intangible investments, which intensifies the economic downturn. The negative growth effect produced by the worsening of the investment allocation is stronger in countries with highly developed financial systems and institutions.

Suggested Citation

  • Fernández, Ana I. & González, Francisco & Suárez, Nuria, 2013. "The real effect of banking crises: Finance or asset allocation effects? Some international evidence," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2419-2433.
  • Handle: RePEc:eee:jbfina:v:37:y:2013:i:7:p:2419-2433
    DOI: 10.1016/j.jbankfin.2013.02.012
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    More about this item

    Keywords

    Asset allocation; Banking crisis; Economic growth; Intangible assets; Institutions;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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