2009年-世界发展银行全球_The_Economic_and_Fiscal_Consequences_of_Financial_Crises_5页_606kb

Summary of "The Economic and Fiscal Consequences of Financial Crises"

Core Content

This document discusses the economic and fiscal consequences of financial crises, focusing on the patterns observed in both advanced and emerging market economies. It emphasizes the long-term effects of banking crises on asset prices, output, employment, and government finances.

Main Points

• Financial Crises are Protracted and Severe:

  • Housing price declines average 35.5% from peak to trough, lasting around six years.
  • Equity price declines average 55.9%, with a downturn phase of about 3.4 years.
  • Real GDP per capita typically falls by over 9% during the downturn, which lasts about two years on average.
  • Unemployment rates rise by an average of 7 percentage points, with some historical episodes experiencing increases of over 20 percentage points.

• Fiscal Impact of Crises:

  • Tax revenues shrink as economic conditions worsen.
  • Fiscal deficits increase significantly, with an average rise of 86% in the three years following a banking crisis.
  • Government debt rises rapidly, often due to bailout costs and increased spending, with some countries experiencing deficits as high as 15% of GDP.

• Sovereign Risk and Credit Downgrades:

  • Sovereign default, debt restructuring, or near defaults are common in emerging markets.
  • Credit rating downgrades are a typical outcome, as seen in Finland's case, where its rating dropped from 79 to 69 in three years.
  • Advanced economies are not immune to credit downgrades, though they are less frequent.

• Emerging Market Implications:

  • The global nature of the current crisis limits the ability of countries to grow their way out through exports.
  • Emerging markets face a growth slowdown due to declines in terms of trade and reduced access to external private financing.
  • The current lull in sovereign defaults may end if the recovery in major economies is delayed.
  • Fiscal space is limited for emerging markets, and their capacity for sustained fiscal stimulus is capped by historically low debt thresholds.

Key Information

• Historical Data:

  • The document includes data from major financial crises such as the 1997-1998 Asian crisis, the 2001 Argentine crisis, and the 1991 Finnish and Swedish crises.
  • It also references the 1929 U.S. crash and the 1899 Norwegian crisis for comparative analysis.

• Fiscal Deficits:

  • Table 1 provides a detailed overview of fiscal deficits in various countries, showing the percentage increase in deficits following crises.
  • Notably, Spain was the only country in the sample to show a modest increase in GDP growth post-crisis.

• Debt Intolerance:

  • Over half of emerging market sovereign defaults since World War II occurred at debt levels below 60% of GDP.
  • This indicates a general intolerance for debt, both external and domestic, among emerging economies.

Conclusion

Financial crises have profound and lasting effects on economies, characterized by deep and prolonged declines in asset prices, output, and employment. These crises significantly worsen government finances, leading to large fiscal deficits and increases in public debt. Sovereign creditworthiness is often undermined, resulting in rating downgrades or defaults. For emerging markets, the global dimension of the current crisis exacerbates the challenges, as they face reduced access to external financing and limited fiscal space. Policymakers in these countries must be aware of the risks associated with high debt levels and the need for careful fiscal management during and after crises.

References

• Ilzetzki, Ethan, Enrique Mendoza, and Carlos Vegh, "How big (small) are fiscal multipliers?" University of Maryland, June 2009.
• Reinhart, Carmen M. and Kenneth S. Rogoff, "The Aftermath of Financial Crises," American Economic Review, Vol. 99 No. 2, May 2009a.
• Reinhart, Carmen M. and Kenneth S. Rogoff, "Banking Crises: An Equal Opportunity Menace," NBER Working Paper 14587, December 2008.
• Reinhart, Carmen M., Kenneth S. Rogoff, and Miguel A. Savastano, "Debt Intolerance," Brookings Papers on Economic Activity, Vol.1 Spring 2003.