The origins of financial and economic crises differ. These origins matter both for their resolution and for analyzing the magnitude of their impact on the long-term growth of an economy. Since the 1970s, more than 110 crises have erupted in over 90 countries. Some of these crises were large and systemic. Others had a more limited impact and affected mostly some large banks and a specific sector or region of the economy. One can distinguish four main types of financial crises. Stock market crashes in isolation are usually the least harmful to long-term GDP growth. Banking crises may happen without involving the real estate sector. Property crises may occur without banking crises. Property and banking crises occurring together are much more costly, and their negative impacts last longer. Currency crises usually have their roots in poor macroeconomic policies combined with important structural imbalances in the domestic economy, and they make everything worse for an economy. Combinations of these four types of crises are the most costly both in terms of large immediate losses of GDP and in terms of pulling the economy down from its long-term, secular growth path for long periods of time, often between seven and ten years.1 The crises of Chile in 1981, Thailand in 1997, and Iceland in 2008 are examples of costly combined crises.
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