CXO

What's The Damage? Medium-term Output Dynamics After Banking Crises

Date Added: Nov 2009
Format: PDF

This paper investigates the medium-term behavior of output following banking crises, and its association with pre- and post-crisis conditions and policies. The author finds that output tends to be depressed substantially following banking crises, with no rebound to the precrisis trend. However, growth does eventually tend to return to its precrisis rate, with substantial crosscountry variation in outcomes. The depressed path of output typically results from reductions of roughly equal proportions in the employment rate, the capital-to-labor ratio, and total factor productivity.