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

  • Dobromil Serwa

    ()

    (Warsaw School of Economics, National Bank of Poland)

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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File URL: http://kolegia.sgh.waw.pl/pl/KAE/struktura/IE/struktura/ZES/Documents/Working_Papers/aewp03-08.pdf
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Paper provided by Department of Applied Econometrics, Warsaw School of Economics in its series Working Papers with number 25.

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Length: 38 pages
Date of creation: 25 Mar 2008
Date of revision:
Handle: RePEc:wse:wpaper:25
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