Pre‐Crisis Conditions and Financial Crisis Duration

Thanh Cong Nguyen and Tien Ho Thuy

The World Economy, 2025, vol. 48, issue 5, 997-1019

Abstract: This paper examines how pre‐crisis conditions affect the duration of different types of financial crises using a data sample of 311 financial crises in 89 countries over the period 1985–2019. Results from our parametric survival analysis show that the duration of any type of financial crisis is longer for countries having higher levels of public debt prior to financial crises, whereas it is shorter for countries characterised by higher pre‐crisis levels of (i) current account balance, (ii) international reserves, (iii) GDP growth and (iv) institutional quality. Similarly, while pegged exchange rate regimes, productivity shocks and negative commodity price shocks are associated with a longer duration of financial crises, majority governments help countries emerge faster from crises. Moreover, pre‐crisis expansion of fiscal and monetary policies helps to shorten financial crises. We also find a positive effect of pre‐crisis fiscal balance on the probability of crisis ending, and it is noteworthy that this effect is strengthened under majority governments and a stronger institutional environment. Our empirical findings offer some important policy implications.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/twec.13662

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:worlde:v:48:y:2025:i:5:p:997-1019

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0378-5920

Access Statistics for this article

The World Economy is currently edited by David Greenaway

More articles in The World Economy from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().