The Cleansing Effect of Banking Crises

Steven Ongena, Reint Gropp, Rocholl, Jörg and Vahid Saadi

No 15025, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We assess the cleansing effects of the 2008-2009 financial crisis. U.S. regions with higher levels of supervisory forbearance on distressed banks see less restructuring in the real sector: fewer establishments, firms, and jobs are lost when more distressed banks remain in business. In these regions, the banking sector has been less healthy for several years after the crisis. Regions with less forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks.

Keywords: Cleansing effect; Banking crises; Supervisory forbearance; Productivity growth (search for similar items in EconPapers)
JEL-codes: G01 G21 G28 O43 (search for similar items in EconPapers)
Date: 2020-08
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: The cleansing effect of banking crises (2022)
Working Paper: The cleansing effect of banking crises (2020)
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