Aleksandra Zdzienicka

The Consequences of Banking Crises for Public Debt

The aim of this paper is to assess the consequences of banking crises for public debt. Using an unbalanced panel of 154 countries from 1980 to 2006, the paper shows that banking crises are associated with a significant and long-lasting increase in government debt. The effect is a function of the severity of the crisis. In particular, for severe crises, comparable to the most recent one in terms of output losses, banking crises are followed by a medium-term increase of about 37 percentage points in the government gross debt-to-GDP ratio. Measuring the increase in debt in this manner seems more appropriate than some of the measures used in the literature that have provided off-quoted and very large numbers for the run-up in debt. In addition, the debt ratio increased more in countries with a higher initial gross debt-to-GDP ratio and with a higher initial foreign debt-to-GDP ratio. Les consequences des crises bancaires pour la dette publique L’objectif de ce document est de determiner l’impact des crises bancaires sur la dette publique. Les resultats obtenus utilisant un panel non-cylindre de 154 pays sur la periode 1980-2006 montrent que les crises bancaires provoquent une augmentation significative et persistante de la dette publique. Cet effet depend de la severite de la crise. Plus precisement, les crises dont la severite est comparable a la crise la plus recente en termes de pertes de PIB augmentent la dette publique brute par rapport PIB d’environ 37 points de pourcentage a moyen terme. Cette approche semble etre plus appropriee par rapport a celles utilisees dans la litterature qui centrees sur la dette publique elle-meme rapportent l’impact beaucoup plus important des crises bancaires. De plus, l’impact des crises bancaires croit en fonction du niveau initial de la dette public et de la dette exterieur par rapport au PIB.

Banking Crises and Short and Medium Term Output Losses in Developing Countries: The Role of Structural and Policy Variables

The aim of this work is to assess the short and medium term impact of banking crises on developing economies. Using an unbalanced panel of 159 countries from 1970 to 2006, the paper shows that banking crises produce significant output losses, both in the short and in the medium term. The effect depends on structural and policy variables. Output losses are larger for relatively more wealthy economies, characterized by a higher level of financial deepening and larger current account imbalances. Flexible exchange rates, fiscal and monetary policy have been found to be efficient tools to attenuate the effect of the crises. Among banking intervention policies, liquidity support resulted to be the one associated with lower output losses.

The New Normal : A Sector-level Perspective on Productivity Trends in Advanced Economies

Total factor productivity growth was stagnant or slowing in many advanced countries even prior to the crisis. This paper documents sector-level productivity patterns across advanced economies prior to the crisis and examines the role of product and labor market rigidities as well as innovation and investments in information technology and human capital in driving productivity differences across sectors and countries. Since productivity payoffs of reforms evolve over time, we also focus on large changes in the structural indicators examine their dynamic impact on productivity, employment, and output. Our results suggest that reform priorities depend on country-specific settings, including the scale of specific policy distortions and the distance from the technology frontier. Productivity gains from reforms are large and materialize predominantly in the medium term, with some important variations across industries and countries.

Private Sector Deleveraging and Growth Following Busts

Balance sheet recessions have been a drag on activity after the Global Financial Crisis, underscoring the important role of balance sheet adjustment for resuming sustained growth. In this paper we examine private sector deleveraging experiences across 36 advanced and emerging economies countries since 1960. We consider the common features and divergent experiences of deleveraging episodes across countries, and analyze empirically the impact of different aspects of deleveraging during the bust phase of leverage cycles on subsequent medium-term growth. The results suggest that larger and quicker unwinding of non-financial sector debt overhangs is associated with sizable medium-term output gains, and that policies should focus on facilitating up-front balance sheet adjustment.

Effects of Monetary and Macroprudential Policies on Financial Conditions: Evidence from the United States

The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically -- especially compared to the effects of macroprudential policies -- and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries -- with the effects varying with country-specific characteristics -- an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.