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New Evidence on the Aftermath of Financial Crises in Advanced Countries

Christina D. Romer and David Romer ()

American Economic Review, 2017, vol. 107, issue 10, 3072-3118

Abstract: This paper examines the aftermath of postwar financial crises in advanced countries. We construct a new semiannual series on financial distress in 24 OECD countries for the period 1967-2012. The series is based on assessments of the health of countries' financial systems from a consistent, real-time narrative source, and classifies financial distress on a relatively fine scale. We find that the average decline in output following a financial crisis is statistically significant and persistent, but only moderate in size. More important, we find that the average decline is sensitive to the specification and sample, and that the aftermath of crises is highly variable across major episodes. A simple forecasting exercise suggests that one important driver of the variation is the severity and persistence of financial distress itself. At the same time, we find little evidence of nonlinearities in the relationship between financial distress and the aftermaths of crises.

JEL-codes: E32 E44 G01 G20 N10 N20 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20150320
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