The real impact of financial crises

Elias Brandt, Scott Dressler () and Erwan Quintin ()

Economic and Financial Policy Review, 2004, No 01, 15 pages

Abstract: Output falls precipitously in most emerging nations that experience financial crises. The authors conjecture that a significant part of the real impact of financial crises is due to the fact that during turbulent times firms choose to leave a large fraction of productive resources idle until business conditions improve. In the case of Mexicos 199495 crisis, they calculate that capital utilization could account for as much as half the drop in standard measures of total factor productivity. Capital utilization matters much more during financial crises than during other periods, they argue, because crises create ideal conditions for large swings in utilization rates.

Keywords: Financial; crises (search for similar items in EconPapers)
Date: 2004
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