How bad are twins? Output costs of currency and banking crises

M M Hutchison and Ilan Noy

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: We investigate the output effects of banking and currency crises in emerging markets, focusing on whether "twin crises" entail especially large losses. Recent literature emphasizes the costs of financial crises, and suggests that twin crises are particularly damaging to the real economy. Using a panel data set for 1975-97, we find that currency (banking) crises are very costly, reducing output by about 5%-8% (8%-10%) over a 2-4 year period. The cumulative loss of both types of crises is therefore very large. We do not find, however, additional feedbacks or interactive effects associated with twin crises further damaging the economy.

Keywords: banking crisis; balance of payments; twin crisis; growth (search for similar items in EconPapers)
Date: 2005-08-01
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Citations: View citations in EconPapers (130)

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Related works:
Journal Article: How Bad Are Twins? Output Costs of Currency and Banking Crises (2005)
Working Paper: How bad are twins? output costs of currency and banking crises (2002)
Working Paper: How Bad Are Twins? Output Costs of Currency and Banking Crises
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