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

Dobromił Serwa ()

No 25, Working Papers from Department of Applied Econometrics, Warsaw School of Economics

Abstract: 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.

Keywords: banking crises; costs; output growth; event-study (search for similar items in EconPapers)
JEL-codes: C32 E51 G15 G21 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2008-03-25
New Economics Papers: this item is included in nep-ban and nep-mac
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Related works:
Journal Article: Larger crises cost more: Impact of banking sector instability on output growth (2010)
Working Paper: Larger crises cost more: impact of banking sector instability on output growth (2007)
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