 Responding to Banking Crises: Lessons From Cross-Country EvidenceEnrica Detragiache () and Giang Ho No 2010/018, IMF Working Papers from International Monetary Fund Abstract: A common legacy of banking crises is a large increase in government debt, as fiscal resources are used to shore up the banking system. Do crisis response strategies that commit more fiscal resources lower the economic costs of crises? Based on evidence from a sample of 40 banking crises we find that the answer is negative. In fact, policies that are riskier for the government budget are associated with worse, not better, post-crisis performance. We also show that parliamentary political systems are more prone to adopt bank rescue measures that are costly for the government budget. We take advantage of this relationship to instrument the policy response, thereby addressing concerns of joint endogeneity. We find no evidence that endogeneity is a source of bias. Keywords: WP; Policy index; response index; Policy response index; resolution policy; Policy response; Banking crises; banking crisis policies; banking crisis cost; bank support policy; blanket government guarantee; bank-support policy; crisis response policy; countercyclical policy tool; output growth; crisis resolution policy; policy measure; crisis performance; bank rescue policy; Crisis management; Crisis resolution; Global (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2010/018 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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