Global crisis

Zuzana Fungáčová, Eeva Kerola, Laurent Weill, 28 March 2020

Trust in banks is a core determinant of financial system effectiveness. While it is well-established that trust in banks fell sharply following the Global Crisis and affected individual decision-making and risk preferences, the longer-term impact of banking crises on trust in banks has not yet been explored. This column looks at the effect of experiencing a banking crisis on people’s long-term confidence in banks. It shows that living through a banking crisis diminishes trust in banks, especially for more mature individuals, and that the loss of trust is long-lasting. 

Jon Danielsson, Robert Macrae, Dimitri Vayanos, Jean-Pierre Zigrand, 26 March 2020

Many comparisons have been made between the coronavirus crisis and the global systemic crisis in 2008. This column argues that seen through the lens of exogenous and endogenous risk, these two crises are quite different. Coronavirus is unlikely to cause a global systemic crisis, and the policy response should be different.

Aida Caldera, Alessandro Maravalle, Lukasz Rawdanowicz, Ana Sanchez Chico, 23 March 2020

Global economic growth is expected to remain weak and significant downside risks persist. As room for conventional monetary policy is limited or exhausted, policymakers will need to rely increasingly on fiscal policy to stabilise the economy during the next economic downturn. This column presents new OECD estimates which suggest that automatic stabilisers on average offset 60% of a specific shock to market income across 23 OECD economies. However, there are marked differences across OECD countries leaving scope to make automatic stabilisers more effective.

M. Ayhan Kose, Peter Nagle, Franziska Ohnsorge, Naotaka Sugawara, 16 March 2020

The global economy has experienced four waves of rapid debt accumulation in emerging and developing economies over the past 50 years. This column examines these waves of debt and puts the fourth (current) wave in historical context. The current wave of debt, which started in 2010, stands out for its exceptional size, speed, and breadth. While the previous three waves all ended with widespread financial crises, policymakers have a range of options to reduce the likelihood of the current debt wave ending in crisis.

Henrik Müller, 14 March 2020

The coronavirus crisis is hitting economies hard. This column argues that policymakers risk doing too little too late – and creating plenty of confusion on the way. It also suggests some lessons that can be learnt from the response to the last crisis.

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