New Evidence on the Impact of Financial Crises in Advanced Countries

This paper examines the aftermath of financial crises in advanced countries in the four decades before the Great Recession. We construct a new series on financial distress in 24 OECD countries for the period 1967–2007. The series is based on assessments of the health of countries’ financial systems from a consistent, real-time narrative source; and it classifies financial distress on a relatively fine scale, rather than treating it as a 0-1 variable. We find that output declines following financial crises in modern advanced countries are highly variable, on average only moderate, and often temporary. One important driver of the variation in outcomes across crises appears to be the severity and persistence of the financial distress itself.