What determines output losses after banking crises? |
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| Institution: | 1. Queens College, City University of New York, New York, USA;2. Clemson University, Clemson, USA;1. IRES and Economics School of Louvain, Université catholique de Louvain, 1348 Louvain-la-Neuve, Belgium;2. CREA, University of Luxembourg, Luxembourg;1. Department of Economics Université de Montréal C.P. 6128, succursale Centre-ville Montréal QC H3C 3J7 Canada;2. Development Research Group, The World Bank, 1818 H St N.W., Washington D.C. 20433, USA;1. Department of Economics, University of Nevada, Las Vegas, NV 89154-6005, United States\n;2. Department of Finance, University of Nevada, Las Vegas, NV 89154-6008, United States;3. Department of Economics, Queens College, CUNY, Flushing, New York, NY 11367-1597, United States\n |
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| Abstract: | We examine the output costs associated with 150 banking crises using cross country data for years after 1970. Many banking crises do not lead to contractions and most banking crises do not lead to large contractions, a result that holds for developed and developing economies. We examine which variables help to predict output changes after a banking crisis using Bayesian Model Averaging. For developed economies, we find that the output losses are positively related to prior economic conditions such as credit growth. For low-income economies, we find that other factors such as having a stock market and deposit insurance are more important. |
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