We examine the evolution of real per capita GDP around 100 systemic banking crises. Part of the costs of these crises owes to the protracted nature of recovery. On average, it takes about eight years to reach the pre-crisis level of income; the median is about 6 ½ years. Five to six years after the onset of crisis, only Germany and the US (out of 12 systemic cases) have reached their 2007-2008 peaks in real income. Forty-five percent of the episodes recorded double dips. Postwar business cycles are not the relevant comparator for the recent crises in advanced economies.
The authors wish to acknowledge Olivier Blanchard, Max Harris, Vincent R. Reinhart and Takeshi Tashiro for helpful comments, and National Science Foundation Grant No. 0849224 for research support. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Carmen M. Reinhart & Kenneth S. Rogoff, 2014. " Recovery from Financial Crises: Evidence from 100 Episodes, " American Economic Review, American Economic Association, vol. 104(5), pages 50-55, May. citation courtesy of