IDEAS home Printed from https://ideas.repec.org/p/red/sed008/180.html
   My bibliography  Save this paper

On the cost of financial crises

Author

Listed:
  • Mark Wright

    (UCLA)

  • Guido Sandleris

    (UTDT and Johns Hopkins University)

Abstract

Financial crises are costly. In the recent crisis in Argentina, for example, from the onset of sovereign debt repayment difficulties at the end of 2000 until the beginning of 2002, real GDP dropped by almost 20%. A simple aggregate growth accounting exercise suggests that a large part of this decline is related to a fall in total factor productivity. What could cause such a large decline in aggregate productivity? Using a unique dataset that tracks the experiences of individual manufacturing establishments in Argentina during the financial crisis at an annual frequency, this paper examines the hypothesis that the collapse in the Argentine financial sector led to a decline in the efficiency of the resource allocation mechanism. We document that declines in factor utilization levels only explain a portion of the decrease in total factor productivity, and that there is evidence that the efficiency of resource allocation deteriorated. We conclude by quantifying the extent to which this decline in allocative efficiency explains the decline in aggregate output and productivity.

Suggested Citation

  • Mark Wright & Guido Sandleris, 2008. "On the cost of financial crises," 2008 Meeting Papers 180, Society for Economic Dynamics.
  • Handle: RePEc:red:sed008:180
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    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:red:sed008:180. 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: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.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.

    We have no references for this item. You can help adding them by using 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.