Transcript The impact of the crisis

The impact of the crisis
Jens Henriksson
Executive Director IMF
Banking Crises
88 crises during 40 years
WEO Oct 09
Currency crises
222 crises
WEO Oct 09
Key facts for banking crises
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Output does not recover to pre-crisis trend
Substantial medium term loss 10 percent
Trend returns to old trend
The variation of outcome is substantial
In currency crisis, only 3 percent
WEO Oct 09
Medium-Term Output per Capita after Financial
Crises: Case Studies (Log scale)
WEO Oct 09
What are the factors before?
• Economies with large current account
deficits, rising inflation and deteriorating
public finances before a crisis has larger
output losses
• Currency crisis and banking crisis at the
same time gives larger losses
• Countries with higher precrisis levels of
employment protection has larger losses
WEO Oct 09
What policies gives lower losses?
• Macroeconomic policy support
- fiscal stimulus gives smaller medium
term losses
- evidence on monetary policy stance
mixed (weaker transmission?)
• Structural reforms
- some evidence on beneficial role
• External conditions matters
WEO Oct 09
A longer perspective
Billion SEK
3,500
3,500
3,000
3,000
2,500
2,500
2,000
Trend growth 71-90
GDP in fixed prices
2,000
1,500
1,000
1,000
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
1,500
My conclusions
• Deal with the banking crisis fast.
Two rules: Blanket guarantee. And take
shares!
• Let the automatic stabilisers work. If low,
use discretionaty fiscal policy.
• Fiscal consolidation
• Think structurally but be consistent
What is good for the country is
good for the small and medium
sized enterprises!