The economic and fiscal consequences of financial crises

Reinhart, Carmen (2009): The economic and fiscal consequences of financial crises. Published in: VoxEU-Centre for Economic Policy Research (26 January 2009): pp. 1-10.

Abstract

Financial crises are historically associated with the “4 deadly D’s”: Sharp economic downturns follow banking crises; with government revenues dragged down, fiscal deficits worsen; deficits lead to debt; as debt piles up rating downgrades follow. For the most fortunate countries, the crisis does not lead to the deadliest D: default, but for many it has.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial crises, unemployment, debt, deficit, housing prices
• Subjects: F - International Economics > F0 - General; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

References

Reinhart and Rogoff (2009a). “The Aftermath of Financial Crises,” (with Kenneth S. Rogoff), American Economic Review, forthcoming, May 2009.

Reinhart, Carmen M. and Kenneth S. Rogoff (2009b) This Time is Different: Eight Hundred Years of Financial Folly (Princeton: Princeton University Press, forthcoming).

Calvo, Guillermo A., Alejandro Izquierdo, and Rudy Loo-Kung (2006) “Relative Price Volatility Under Sudden Stops: The Relevance of Balance Sheet Effects,” Journal of International Economics 9(1): 231–254.