Do Financial Crises Erode Potential Output? a cross country analysis of industrial and emerging economies

Fernando Oliveira and Myrian Petrassi

No 388, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: Our objective in this paper is to analyze empirically if financial crises have decreased potential output for a selected group of economies. We estimate different stylized Phillips curves to verify if inflationary pressures were stronger on the recovery periods after financial crises, relative to the recovery periods after recessions. Our results, in general, do not show any clear empirical evidence that financial crises erode potential output. Moreover, there are no apparent differences in terms of the effects of financial crises over potential output between emerging and industrial economies.

Date: 2015-06
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