Is the crisis problem growing more severe?

Abstract

SummaryThe crisis problem is one of the dominant macroeconomic features of our age. Its prominence suggests questions like the following: Are crises growing more frequent? Are they becoming more disruptive? Are economies taking longer to recover? These are fundamentally historical questions, which can be answered only by comparing the present with the past. To this end, this paper develops and analyzes a data base spanning 120 years of financial history. We find that crisis frequency since 1973 has been double that of the Bretton Woods and classical gold standard periods and is rivaled only by the crisis-ridden 1920s and 1930s. History thus confirms that there is something different and disturbing about our age. However, there is little evidence that crises have grown longer or output losses have become larger. Crises may have grown more frequent, in other words, but they have not obviously grown more severe. Our explanation for the growing frequency and chronic costs of crises focuses on the combination of capital mobility and the financial safety net, including the implicit insurance against exchange risk provided by an ex ante credible policy of pegging the exchange rate, which encourages banks and corporates to accumulate excessive foreign currency exposures. We also provide policy recommendations for restoring stability and growth.

The long-run determinants of inequality: What can we learn from top income data?

“…To this end we use the fact that banking crises cause drastic contractions of the financial sector. Using data from Bordo et al (2001) and Laeven and Valencia (2008) on banking crises, we can esti-mate the impact of these events on top income shares. When doing this, we naturally do not include any direct controls for financial development as these are endogenous to the crises itself.…”

“…Mitchell = Mitchell (1995, 1998a, 1998b; OECD = OECDE world tax database; RS = Rousseau and Sylla (2003); RSS = Rydqvist, Spizman and Strebulaev (2007); RW = Roine and Waldenström (2006); RZ = Rajan and Zingales (2003); WDI = World Development Indicators (World Bank). (2009) 1966-1985a ,1990-20028 8 France Piketty (2007) 1915-199818 18 Germany Dell (2009) 1925-1938,1944-199813 13 India Banerjee and Piketty (2009) 1922-199916 0 Ireland Nolan (2009) 1938, 1943, 1965,1973 Bordo et al (2001) and Laeven and Valencia (2008). The regressions include ΔGDPpc, ΔOpenness, ΔPop and ΔGovspend.…”

A Crisis Not Wasted Institutional and Structural Reforms Behind Norway's Strong Macroeconomic Performance.

“…The Norwegian unemployment rate peaked at about 6.5 percent in 1993, the first year after the end of the banking crisis. 16 Despite the fact 15 These methods have been improved by Bordo et al (2001). 16 Both Norway and Sweden put in place labor market programs to increase the human capital of unemployed workers.…”

How Strong is the Case for Dollarization in Central America? An Empirical Analysis of Business Cycles, Credit Market Imperfections and the Exchange Rate

“…B01 refers to Bordo, Eichengreen, Klingebiel, and Martinez-Peria (2001), CK03 to Caprio and Klingebiel (2003), J08 to Jácome (2008), KR99 to Kaminsky and Reinhart (1999), and LV08 to Laeven and Valencia (2008).…”