Crises Do Not Cause Lower Short-Term Growth

Kaiwen Hou, David Hou, Yang Ouyang, Lulu Zhang and Aster Liu

Papers from arXiv.org

Abstract: It is commonly believed that financial crises "lead to" lower growth of a country during the two-year recession period, which can be reflected by their post-crisis GDP growth. However, by contrasting a causal model with a standard prediction model, this paper argues that such a belief is non-causal. To make causal inferences, we design a two-stage staggered difference-in-differences model to estimate the average treatment effects. Interpreting the residuals as the contribution of each crisis to the treatment effects, we astonishingly conclude that cross-sectional crises are often limited to providing relevant causal information to policymakers.

Date: 2022-11, Revised 2022-11
New Economics Papers: this item is included in nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2211.04558

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