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Once Bitten, Twice Shy: Experiences Of A Banking Crisis And Expectations Of Future Crises

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  • Shannon Mudd
  • Neven Valev

Abstract

Survey data from Bulgaria show that people who had experienced a loss during a banking crisis are significantly more likely to expect a new crisis. This result holds despite 12 years between the earlier crisis and the survey, and the dramatically improved performance of the financial sector and the economy in the meantime. However, we find that earlier experiences affect expectations only for less informed individuals. Individuals who are more informed about the economy are unaffected by their prior experiences.

Suggested Citation

  • Shannon Mudd & Neven Valev, 2009. "Once Bitten, Twice Shy: Experiences Of A Banking Crisis And Expectations Of Future Crises," William Davidson Institute Working Papers Series wp969, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2009-969
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/64382/1/wp969.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Osili, Una Okonkwo & Paulson, Anna, 2014. "Crises and confidence: Systemic banking crises and depositor behavior," Journal of Financial Economics, Elsevier, vol. 111(3), pages 646-660.
    3. Stix, Helmut, 2013. "Why do people save in cash? Distrust, memories of banking crises, weak institutions and dollarization," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4087-4106.

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    More about this item

    Keywords

    banking crisis; trust; expectations;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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