Annex I. Macro-Fiscal and Macro-Financial Effects of Banking Sector Characteristics1
Banking activities influence economic booms and downturns through their impact on real sector activities. This interaction has fiscal implications due to effects on revenues, expenditures, including automatic stabilizers, and in some cases, government interventions in the banking sector. Economic booms associated with rapid banking expansions are typically followed by deeper and longer recessions, slower recoveries, and greater fiscal sustainability pressures. This annex provides the analysis that underlies the paper’s discussion on the macro-fiscal and macro-financial effects of the banking sector on the economy, identifying in particular banking sector characteristics that affect the depth of recessions and length of recoveries.
Annex II. Fiscal Cost of Systemic Banking Crises1
This annex presents cross-country econometric evidence relating the fiscal costs of systemic banking crises to a variety of precrisis macroeconomic and banking sector financial variables, countries’ institutional frameworks, and governments’ responses to crises (Section III.D). It provides evidence on both direct fiscal costs and overall fiscal costs of systemic banking crises.