How do institutions affect output recovery after financial crises?
Journal
Journal of International Money and Finance
Journal Volume
146
ISSN
0261-5606
Date Issued
2024-08
Author(s)
Abstract
This study examines whether a country's institutional quality can affect its output recovery after the recessions caused by financial crises. Utilizing a sample of 66 countries that experienced various financial crises during the period 1985–2010, we find that the quality of government institutions is negatively associated with the duration of recovery as well as the depth and severity of output losses during recessions. The results remained valid even after accounting for potential endogeneity. Moreover, institutional quality's ability to improve output recovery is more pronounced for countries with the largest output losses, when coupled with an expansionary monetary policy, in emerging economies, during banking and sovereign debt crises, and in the 1990s.
Subjects
Financial crisis
Output recovery
Quality of institution
Recession
Publisher
Elsevier BV
Description
Article number: 103120
Type
journal article