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

  • Serwa, Dobromił

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.

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

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:5101
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