Carmen Reinhart and Ken Rogoff have released a new cross-country empirical study “Banking Crises: An Equal Opportunity Menace“. Their analysis shows that the average fiscal impact of a banking crisis is to increase the level of public debt by 86 percent, such that the public debt nearly doubles. They also show that the typical duration of a housing bust is 4-6 years.
Such cross-country averages are useful benchmarks and it is useful to think about the reasons why the current Irish crisis might deviate from such patterns.
Update: Reinhart and Rogoff have also just released a much shorter companion paper “The Aftermath of Financial Crises” [to be presented at the January AEA meetings in San Francisco].