WP 2012-13: The Real Output Costs of Financial Crisis: A Loss Distribution Approach
WP 2012-13: The Real Output Costs of Financial Crisis: A Loss Distribution Approach
WP 2012-13: The Real Output Costs of Financial Crisis: A Loss Distribution Approach
N°
WP 2012-13
Title
The Real Output Costs of Financial Crisis: A Loss Distribution Approach
Author(s)
Daniel Kapp and Marco Vega
Language
English
Date
2012/05/31
Abstract
We study cross-country GDP losses due to financial crises in terms of frequency (number of loss events per period) and severity (loss per occurrence). We perform the Loss Distribution Approach (LDA) to estimate a multi-country aggregate GDP loss probability density function and the percentiles associated to extreme events due to financial crises. We find that output losses arising from financial crises are strongly heterogeneous and that currency crises lead to smaller output losses than debt and banking crises. Extreme global financial crises episodes, occurring with a one percent probability every five years, lead to losses between 2.95% and 4.54% of world GDP.