Real effects of banking crises: a survey of the literature

Luisa Carpinelli ()
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Luisa Carpinelli: Banca d'Italia

No 55, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The literature is unanimous in highlighting that banking crises have a negative impact on GDP, usually more pronounced in developing economies. The magnitude of the losses is more controversial: the quantitative results of studies on the repercussions of banking crises on economic activity, in fact, are quite uneven. Estimates on the correlation between financial variables and GDP indicate output losses generally greater than ten percentage points of pre-crisis output and exhibit high variability, as a result of the large number of different methodologies adopted to measure real costs. The very high values thus obtained often reflect a problem in identifying the causal nexus between banking crises and real output fluctuations. The most recent literature, which examines the relevance of specific channels of transmission based on individual data, tends to produce a lower estimate of the direct causal effects of banking crises, which are rarely found to cause an output loss exceeding 2 per cent.

Keywords: banking crises; real effects; transmission channesl; procyclicality (search for similar items in EconPapers)
JEL-codes: E44 E51 G01 G21 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-ban and nep-cba
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