The impact of financial crises on industrial growth: lessons from the last 40 years

Carlos Madeira

No 1214, BIS Working Papers from Bank for International Settlements

Abstract: This work shows the impact of financial crises across industries and the total manufacturing sector. I find both a direct impact of financial crises on all manufacturing growth and an additional effect through an external finance dependence channel. Externally dependent industries experience lower growth during banking and currency crises, especially in emerging markets and developing economies. Banking, currency and sovereign debt crises cause an average reduction in total manufacturing growth of 2.7%, 6% and 1%, respectively, with the direct effect being the most significant component. Finally, I show that macroprudential policies adopted after the Great Financial Crisis attenuated the fall in growth caused by banking crises.

Keywords: financial crises; banking crises; growth; external finance dependence; credit frictions (search for similar items in EconPapers)
JEL-codes: E44 G01 O10 O16 (search for similar items in EconPapers)
Date: 2024-09
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-his
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