New Evidence on the Aftermath of Financial Crises in Advanced Countries
American Economic Review
vol. 107,
no. 10, October 2017
(pp. 3072-3118)
(Complimentary)
Abstract
This paper examines the aftermath of postwar financial crises in advanced countries. We construct a new semiannual series on financial distress in 24 OECD countries for the period 1967-2012. The series is based on assessments of the health of countries' financial systems from a consistent, real-time narrative source, and classifies financial distress on a relatively fine scale. We find that the average decline in output following a financial crisis is statistically significant and persistent, but only moderate in size. More important, we find that the average decline is sensitive to the specification and sample, and that the aftermath of crises is highly variable across major episodes. A simple forecasting exercise suggests that one important driver of the variation is the severity and persistence of financial distress itself. At the same time, we find little evidence of nonlinearities in the relationship between financial distress and the aftermaths of crises.Citation
Romer, Christina D., and David H. Romer. 2017. "New Evidence on the Aftermath of Financial Crises in Advanced Countries." American Economic Review, 107 (10): 3072-3118. DOI: 10.1257/aer.20150320Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- G01 Financial Crises
- G20 Financial Institutions and Services: General
- N10 Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: General, International, or Comparative
- N20 Economic History: Financial Markets and Institutions: General, International, or Comparative