The Real Effect of Banking Crises

Banking crises are usually followed by a decline in credit and growth. Is this because crises tend to take place during economic downturns, or do banking sector problems have independent negative effects on the economy? To answer this question we examine industrial sectors with differing needs for f...

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Bibliographic Details
Main Author: Dell'Ariccia, Giovanni
Other Authors: Detragiache, Enrica, Rajan, Raghuram
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2005
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a The Real Effect of Banking Crises  |c Giovanni Dell'Ariccia, Raghuram Rajan, Enrica Detragiache 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2005 
300 |a 34 pages 
651 4 |a United States 
653 |a Economic & financial crises & disasters 
653 |a Depository Institutions 
653 |a Credit 
653 |a Banks 
653 |a Financial crises 
653 |a Banks and banking 
653 |a Monetary economics 
653 |a Monetary Policy, Central Banking, and the Supply of Money and Credit: General 
653 |a Micro Finance Institutions 
653 |a Mortgages 
653 |a Foreign Exchange 
653 |a Currency crises 
653 |a Banks and Banking 
653 |a Macroeconomics 
653 |a Bank credit 
653 |a Banking crises 
653 |a Banking 
653 |a Financial Risk Management 
653 |a Money and Monetary Policy 
653 |a Financial Crises 
700 1 |a Detragiache, Enrica 
700 1 |a Rajan, Raghuram 
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520 |a Banking crises are usually followed by a decline in credit and growth. Is this because crises tend to take place during economic downturns, or do banking sector problems have independent negative effects on the economy? To answer this question we examine industrial sectors with differing needs for financing. If banking crises have an exogenous detrimental effect on real activity, then sectors more dependent on external finance should perform relatively worse during banking crises. The evidence in this paper supports this view. Additional support comes from the fact that sectors that predominantly have small firms, and thus are typically bank-dependent, also perform relatively worse during banking crises. The differential effects across sectors are stronger in developing countries, in countries with less access to foreign finance, and where banking crises have been more severe