The effects of systemic banking crises in the inter-war period

Bruno T. da Rocha, Solomos Solomou*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

10 Citations (Scopus)

Abstract

This paper examines the time-profile of the impact of systemic banking crises on GDP and industrial production using a panel of 24 countries over the inter-war period and compares this to the post-war experience of these countries. We show that banking crises have effects that induce medium-term adjustments on economies. Focussing on an eight-year horizon, it is clear that the negative effects of systemic banking crises last over the entirety of this time-horizon. The effect has been identified for GDP and industrial production. The adverse effect on the industrial sector stands out as being substantially larger in magnitude relative to the macroeconomic effect. Comparing the results across long-run historical periods for the same selection of countries and variables identifies some differences that stand out: the short term macroeconomic impact effects are much larger in the post-war period, suggesting that the propagation channels of shocks operate at a faster pace in the more recent period. Moreover, the time-profile of effects differs, suggesting that modern policies may be modulating the temporal shape of the response to banking crises shocks. However, the broad magnitude of the adverse effect of banking crises remains comparable across these time periods.
Original languageEnglish
Pages (from-to)35-49
Number of pages15
JournalJournal of International Money and Finance
Volume54
DOIs
Publication statusPublished - 1 Jun 2015
Externally publishedYes

Keywords

  • Banking crises
  • Economic history
  • Financial crises
  • Inter-war
  • Local projections

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