Banking crises scar labour productivity, finds BoE paper

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Banking crises permanently damage economic capacity in their host country, according to a working paper published by the Bank of England on January 24.

The authors, Nicholas Oulton and María Sebastiá-Barriel, use a model based on financial crises in 61 countries between 1955 and 2010.

Specifically, the authors find that banking crises reduce the short-run growth of labour productivity by 0.6–0.7% and the long-run level by 0.84–1.1% in each year they extend. Financial crises that were not

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