What causes banking crises?

Patrick Minford, Vo Phuong Mai Le, David Meenagh, Sun, 07/15/2012

This paper adds the Bernanke-Gertler-Gilchrist model to a modified version of the Smets-Wouters model of the US in order to explore the causes of the banking crisis. The authors find that banking crises occur on average once every 40 years and around half are accompanied by financial crisis. Financial shocks on their own, even when extreme, do not cause crises, provided the government acts swiftly to counteract such a shock.

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URL: www.cepr.org/pubs/dps/DP9057.asp

Topics: Global crisis

Tags: US, financial crisis, Banking crisis, financial shocks