The effect of financial crises on potential output: New empirical evidence from OECD countries

Davide Furceri and Annabelle Mourougane

Journal of Macroeconomics, 2012, vol. 34, issue 3, 822-832

Abstract: The aim of this paper is to assess the impact of financial crises on potential output. For this purpose a univariate autoregressive growth equation is estimated on an unbalanced panel of OECD countries over the period 1960–2008. Our results suggest that the occurrence of a financial crisis negatively and permanently affects potential output. In particular, financial crises are estimated to lower potential output by around 1.5–2.4% on average, with most of the impact coming from the effect on capital. The magnitude of the effect increases with the severity of the crisis. These results are robust to the use of an alternative measure of potential output, changes in the methodology and in the sample periods. The impact of financial crises is also found to vary according to structural features of the economies, such as the degree of openness, macro-economic imbalances, financial deepening and the quality of governance.

Keywords: Financial crisis; Potential output (search for similar items in EconPapers)
JEL-codes: F4 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (107)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0164070412000614
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The Effect of Financial Crises on Potential Output: New Empirical Evidence from OECD Countries (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:3:p:822-832

DOI: 10.1016/j.jmacro.2012.05.010

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().