Financial Crises, Development, and Growth: A Long-term Perspective

Carmen Reinhart and Vincent Reinhart

MPRA Paper from University Library of Munich, Germany

Abstract: Observed over long periods, the upward path of the output of most economies occasionally takes jagged steps down. More often than not, these events are associated with a variety of crises, including systemic banking stresses, exchange rate crashes, a burst of inflation, and a restructuring or default on sovereign debt. Using a large panel of countries over a long period, we document that crises are typically associated with lower medium-term growth. That may be a direct causal channel, a reverse channel, or the influence of some other factors on both growth and finance. But they tend to go together. Given that the forces for convergence of income across countries are estimated to be slow, going off track around a crisis will likely have long-lived consequences for relative economic development.

Keywords: Growth; financial crises; development; inflation (search for similar items in EconPapers)
JEL-codes: G1 N1 N2 O4 O5 O50 (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (19)

Published in World Bank Economic Review 1.29(2015): pp. 1-24

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Journal Article: Financial Crises, Development, and Growth: A Long-term Perspective (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:64488

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