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Systemic banking crises revisited

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The IMF paper updates the database on systemic banking crises. Drawing on 151 systemic banking crises episodes from 1970 to 2017, the database includes information on crisis dates, policy responses, and the fiscal and output costs of crises. The authors provide evidence that crises in high-income countries tend to last longer and be associated with higher output losses, lower fiscal costs, and more extensive use of bank guarantees and expansionary macro policies than crises in low- and middle-income countries.

IMF working paper No. 18/206
14 September 2018
Source: International Monetary Fund

Authors:
Luc Laeven, European Central Bank
Fabian Valencia, International Monetary Fund

>  Systemic banking crises revisited

Abstract:

The paper updates the database on systemic banking crises presented in Laeven and Valencia (2008, 2013). Drawing on 151 systemic banking crises episodes around the globe during 1970-2017, the database includes information on crisis dates, policy responses to resolve banking crises, and the fiscal and output costs of crises. We provide new evidence that crises in high-income countries tend to last longer and be associated with higher output losses, lower fiscal costs, and more extensive use of bank guarantees and expansionary macro policies than crises in low- and middle-income countries. We complement the banking crises dates with sovereign debt and currency crises dates to find that sovereign debt and currency crises tend to coincide or follow banking crises.

Conclusion

A decade since the start of the global financial crisis has allowed sufficient time for some crisis episodes to end. However, many countries have been left with important legacy issues in terms of permanent output losses, elevated levels of public debt, policy support still to be fully unwound, and significant government ownership of financial assets. While these crisis episodes have enriched our experience, much remains to be learned regarding how to predict banking crises, how to prevent them, and how best to resolve them. To make progress in such an ambitious endeavor, a key prerequisite is the availability of high-quality data on banking crises. To help in this direction, this paper provides a comprehensive database on systemic banking crises during the period 1970–2017, reflecting updates to outcomes from banking crises reported in our earlier releases (Laeven and Valencia, 2008, 2010, and 2013) and new events that occurred since then.

It is our hope that these data will assist academics and policymakers in improving our understanding of the causes and consequences of banking crises, and how best to resolve them. While only a few countries have experienced a crisis in recent years, this period may just be the lull before the storm.

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