Policy vs Luck in the Financial Crisis

Weathering the financial crisis: good policy or good luck?

Abstract:

The macroeconomic performance of individual countries varied markedly during the 2007-09 global financial crisis. While China’s growth never dipped below 6% and Australia’s worst quarter was no growth, the economies of Japan, Mexico and the United Kingdom suffered annualised GDP contractions of 5-10% per quarter for five to seven quarters in a row. We exploit this cross-country variation to examine whether a country’s macroeconomic performance over this period was the result of pre-crisis policy decisions or just good luck. The answer is a bit of both. Better-performing economies featured a better-capitalised banking sector, lower loan-to-deposit ratios, a current account surplus, high foreign exchange reserves and low levels and growth rates of private sector credit-to-GDP. In other words, sound policy decisions and institutions reduced their vulnerability to the financial crisis. But these economies also featured a low level of financial openness and less exposure to US creditors, suggesting that good luck played a part.

via Weathering the financial crisis: good policy or good luck?.

Related posts:

  1. The Next Bubble: The Looming Crisis in Books About the Financial Crisis
  2. The next, worse financial crisis
  3. Credit Crisis from Luxembourg
  4. Four Myths About the Financial Crisis of 2008
  5. Twilight of the Autocrats: Russia, China and the Financial Crisis

Comments

  1. econoside says:

    If You are looking for economic data
    Econoside | Latest Economic Data