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Vaughan / Economics 639

Vaughan / Economics 639

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Vaughan / Economics 639

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  1. Vaughan / Economics 639

  2. Data Set • Includes “big five” from previous R&R paper (Spain 1977, Norway 1987, Finland 1991, Sweden 1991 and Japan 1992) • Includes other 13 major post-War II banking crisis from the developed world (also previous R&R paper). • Adds 8 emerging market episodes from 1990s and 2000s. • Aftermaths of banking crisis in rich countries and emerging markets have much in common. • Adds Norway 1899 and U.S. 1929 because housing prices are available.

  3. Declines in Housing Prices Averages do not include ongoing crises.

  4. Declines in Equity Prices Averages do not include ongoing crises.

  5. Increase in Unemployment Averages do not include ongoing crises.

  6. Decline in Real GDP Averages do not include ongoing crises.

  7. Increase in Real Public Debt Averages do not include ongoing crises. Increase stems from decline in tax revenue and increase in spending to fight recession, not bailouts.

  8. Financial Crisis-Cum-RecessionU.S. Experience • Decline in Real Housing Prices: - 41.9% / 5 years, 11 months • Decline in Real Equity Prices: - 51.6% / 1 year, 5 months • Increase in Unemployment 5.6 percentage points / 3 years • Decline in Real Per Capita GDP: -5.5% / 1.5 years • Increase in Real Public Debt (3 years following onset of crisis) 41.9% U.S. experience bad, but not as bad as historical averages.