Hostname: page-component-586b7cd67f-tf8b9 Total loading time: 0 Render date: 2024-11-27T23:14:04.290Z Has data issue: false hasContentIssue false
  • English
  • Français

Long-Term Scarring from the Financial Crisis

Published online by Cambridge University Press:  26 March 2020

Ray Barrell
Get access Rights & Permissions [Opens in a new window]

Extract

It is useful to look at the distinction between transitory and permanent effects of a crisis. Financial crises normally bring on a recession, and the output costs can be large, as Hoggarth and Saporta (2001) discuss. In the majority of cases since 1970 in the OECD countries output returns to its trend level and there is no permanent effect. However, there may have been a permanent scar on the level of output in Japan after its crisis in the early 1990s, making the crisis and subsequent recession much more costly. This may reflect the nature and length of the crisis, as the banking sector was left to flounder for some years before its rescue toward the end of the crisis period. This appears to have left a permanent scar because risk premia were subsequently higher, and real asset prices have not fully recovered.

Type
Articles
Information
National Institute Economic Review , Volume 210 , October 2009 , pp. 36 - 38
Copyright
Copyright © 2009 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Barrell, R., Gottschalk, S., Kirby, S. and Orazgani, A. (2009), ‘Projections of migration inflows under alternative scenarios for the World Economy’, Department of Communities and Local Government Economics Paper No. 3.Google Scholar
Barrell, R., Holland, D., Liadze, I. and Pomerantz, O. (2009), ‘Volatility, growth and cycles’, Empirica, 36, pp.177–92.CrossRefGoogle Scholar
Barrell, R. and Kirby, S. (2009), ‘Fiscal sustainability’, National Institute Economic Review, 208, pp. 61–5.CrossRefGoogle Scholar
Barrell, R. and Pain, N. (1997), ‘Foreign direct investment, technological change, and economic growth in Europe’, Economic Journal, 107, pp. 1770–6.CrossRefGoogle Scholar
Brealey, R. and Myers, S. (2000), Principles of Corporate Finance, MacGraw Hill.Google Scholar
Hoggarth, G. and Saporta, V. (2001), ‘Costs of banking crises, some empirical evidence’, Financial Stability Review, June 2001, Bank of England, pp. 148–61.Google Scholar
Weale, M. (2009), ‘Growth prospects and financial services’, National Institute Economic Review, 207, pp. 4–9.CrossRefGoogle Scholar