Financial crises: lessons from history for today

Making use of the propensity score matching method, we match earlier crises (pre-2007) with currently ongoing crises (post-2007). The old and new crises are matched in three dimensions: the global setting in which they occurred, the structure of the economy and the domestic vulnerabilities in the pre-crisis period. Our findings suggest that the euro periphery crises share sufficient commonalities with earlier crises in their pre-crisis domestic vulnerabilities. The study points to two important conclusions. First, the euro periphery crises are composed of unique country experiences; hence, it will not be easily resolved with a 'one-size-fits-all' set of economic policies. Secondly, while each banking crisis has its inherent uniqueness, each crisis also shares sufficient commonalities with one or more of the Asian-5 1996/97 crises, the Nordic banking crisis of the early 1990s or the Japanese banking crisis of the 1990s. Thus, the extensive knowledge accumulated through these former banking crises can help in designing recovery policies.