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The real effect of banking crises: Finance or asset allocation effects? Some international evidence

Ana I. Fernández, Francisco González and Nuria Suárez

Journal of Banking & Finance, 2013, vol. 37, issue 7, 2419-2433

Abstract: This paper analyzes whether the decline in economic growth that follows a banking crisis occurs because of a reduction in the amount of credit available (finance effect) or a worsening in the allocation of investable resources (asset allocation effect). We use a sample of more than 2500 industrial firms in 18 developed and developing countries that experienced 19 systemic banking crises between 1989 and 2007. The results indicate that banking crises negatively affect firms’ intangible investments, which intensifies the economic downturn. The negative growth effect produced by the worsening of the investment allocation is stronger in countries with highly developed financial systems and institutions.

Keywords: Asset allocation; Banking crisis; Economic growth; Intangible assets; Institutions (search for similar items in EconPapers)
JEL-codes: G01 K11 O16 O43 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:7:p:2419-2433

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