Erica Bosio, Rita Ramalho, Carmen Reinhart, 22 March 2021

In sub-Saharan Africa, the government is one of the biggest purchasers of works and services in the economy. Countries in sub-Saharan Africa are also the least efficient when it comes to paying outstanding invoices. This column estimates that the size of government arrears in sub-Saharan Africa was 4.26% of GDP in 2019, and likely increased by an average of 1.92 percentage points of GDP across the region in 2020. Financing the COVID relief and recovery programmes by delaying payments is negatively affecting suppliers and contractors at a time when liquidity is crucial for firm survival, which in turn burdens the banking sector and increases the likelihood of a banking crisis.

Victor Degorce, Eric Monnet, 21 October 2020

The surge in savings following the 2008-2009 Global Crisis and the recent pandemic have rekindled the interest of economists and policymakers in the paradox of thrift, formulated by Keynes in the 1930s. Subsequent research on the Great Depression of the 1930s, however, has not addressed the link between precautionary savings and growth. Using data on deposits in savings institutions of 22 countries, this column studies the fate of savings during the Great Depression and shows that Keynes' intuition was right. Banking crises had an impact on economic growth not only through the direct lending channel, but also indirectly through an increase in precautionary savings. This bears important lessons for today.

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. 

Patrick Honohan, Martin Sandbu, 27 September 2019

Patrick Honohan took over as governor of the Central Bank of Ireland in 2009 with the economy in meltdown, and steered it through its deepest crisis. His new book re-examines what happened, and lessons for future crises. Tim Phillips talks to Patrick and the FT's Martin Sandbu about what policymakers and central bankers can learn from Ireland's ordeal.


Ross Levine, Chen Lin, Wensi Xie, 03 June 2016

There has been much research on the effects of banking crises, but corporate resilience to systemic crises is less well understood. This column uses data from 34 countries from 1990 to 2011 to analyse the role of social trust – societal expectations that people will behave honestly and cooperatively – in building corporate resilience. It finds that social trust facilitates access to trade credit, and dampens the harmful effects of crises on corporate profits and employment.

Nicola Borri, Pietro Reichlin, 04 May 2016

Most commentators agree that a European banking union would end the ‘deadly embrace’ between creditors and governments. This column argues that a banking union would be welcome, but that current proposals are dogged with problems. To resolve these, we should stop discussing debt restructuring and instead enhance the borrowing capacity of the European Stability Mechanism. A programme to buy capital in financial institutions unable to raise it directly on the market should also be set up.

Stefano Micossi, 26 February 2016

A combination of shocks has led to the spectre of a renewed systemic bank crisis within the EU. This column argues that what is needed is a regulatory policy response in the form of joint action by European governments to convince financial investors that bank liabilities are secure.

Anil Ari, Giancarlo Corsetti, Andria Lysiotou, 10 August 2015

Cyprus has been striving to get back on its feet after a painful bailout in 2013. This column examines the lessons that could have been drawn from the Cypriot experience by Greece in its recent attempt to seal a bailout deal. Specifically, lengthy negotiations – while tending to mitigate the risk of contagion – offer little benefit for debtor countries, and capital controls, once implemented, cannot be easily undone. While they come too late for Greece, these lessons can be important for countries in need of financial assistance in the future.

Viral Acharya, Sascha Steffen, 21 April 2013

This paper argues that the European banking crisis can in part be explained by a “carry trade” behavior of banks. The results are supportive of moral hazard in the form of risk-taking by under-capitalized banks to exploit low risk weights and central-bank funding of risky government bond positions.

Nadege Jassaud, Heiko Hesse, 13 April 2013

The recent IMF assessment of Europe’s financial sector found that much has been achieved to address the recent financial crisis in Europe, but vulnerabilities remain, and intensified efforts are needed across a wide front, one of which being bank balance sheet repair. This column looks at progress with bank restructuring in Europe.

María Nieto, Eugene White, 22 March 2013

The euro cannot have a centralised monetary authority and decentralised bank supervision. This column draws on US banking history, detailing how a banking crisis in the nineteenth century led to the creation of dual systems of bank supervision. The US system was imperfect, and the central role and powers of the ECB within the Single Supervisory Mechanism will be to limit the weaknesses of a dual system of supervision. Despite this, hazards remain. For those looking for a guide to the potential threats to financial stability under this system, understanding the US experience is relevant.

Itay Goldstein, Assaf Razin, 11 March 2013

Broadly speaking, there are three types of economic crisis: banking crises and panics, credit frictions and market freezes, and currency crises. This column argues that features from these types of crises have been at work and interacted with each other to shape the events of the last few years. From an extensive review of literature on these issues, it’s clear that the biggest challenge policymakers and economists face is in developing integrative models that better describing contemporary economic realities.

Joshua Aizenman, Ilan Noy, 21 November 2012

Are countries that have previously experienced banking crises less vulnerable to them in the future? This column argues that, in fact, previous crises might make future crises more likely. There isn’t much evidence of a learning process from past mistakes because the regulator often lags behind banking’s pace of innovation. Preparing to prevent the last crisis does not prevent the next and it seems that the ‘too big to fail’ doctrine provides cover for banks, delaying the day of adjustment.

Patrick Minford, Vo Phuong Mai Le, David Meenagh, 15 July 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.

Jon Danielsson, 26 October 2011

Much of macroeconomic policymaking is trial and error. This column discusses calamitous error on the part of Iceland’s policymakers, in the hope that others can at least try something else.

Viral Acharya, 23 September 2011

Viral Acharya of New York University talks to Viv Davies about the recent report issued by the UK's Independent Commission on Banking. They discuss capital requirements and the proposal to ringfence bank’s retail versus investment activities. They also discuss the likely costs of the proposals and what the implications may be for competition in the banking sector. Acharya stresses in particular the importance of appropriate risk weights even with ringfencing, especially in context of the current Eurozone debt crisis. The interview was recorded on 16 September 2011. [Also read the transcript]

Thorvaldur Gylfason, 19 August 2009

Is Iceland perhaps too small to be sustainable as a sovereign state? This column argues there are many reason why small is beautiful. Even though they do not benefit from scale economies and large pools of talent, small countries with cohesive societies can be successful as long as they are open to the world. Still, Iceland stands to gain from joining the EU.

Lans Bovenberg, Coen Teulings, 04 April 2009

Some analysts have argued that the European is poorly positioned to address the crisis since its economic integration has outpaced its integration of politics and governance. This column says that, in the face of the crisis, Europe must now decide between political integration and economic disintegration. It argues for EU-wide banking reforms, financial regulation, macroeconomic policies, and global coordination.

Emre Ergungor, Kent Cherny, 19 March 2009

The way Sweden handled its 1990s banking crisis has been offered as a useful case study in resolving systemic banking crises. This column discusses the merits of the Swedish experience relative to ideal resolution strategies.

Patrick Honohan, Philip Lane, 28 February 2009

Ireland’s huge exports to GDP ratio and privileged position in global supply chains helped it grow rapidly in the 1990s, but are now amplifying its downturn. This column argues that Ireland’s looming banking and public finance crises can be fixed. The government must find new sources of tax revenue and craft a package in which all social partners can claim ownership.



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