The Effect of Loss Experiences in a Banking Crisis on Future Expectations and Behavior

Document Type

Journal Article

Role

Author

Standard Number

1935-1690

Journal Title

BE Journal of Macroeconomics

Volume

10

Issue

1

Publication Date

2010

Abstract

Surveys taken in Bulgaria in both 2008 and 2009 show that people who had experienced a loss during an earlier banking crisis are significantly more likely to expect a new crisis. This result holds despite more than a decade between the earlier crisis and the surveys as well as the dramatically improved performance and stability of both the financial sector and the economy in the meantime. The loss experience also affects behavior. People who experienced a loss in the earlier crisis were more likely to have withdrawn funds from bank deposits in the midst of the international banking crisis in 2009.

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