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Over the past 40 years, there have been more than 120 banking crises around the world. Different governments have responded in different ways. The gross and net costs as a percentage of GDP range wildly, anywhere from less than 1 percent to well beyond 30 percent.
Their share of the foreign investment pie grew from 0.4 percent in 1970 to 15.8 percent in 2008. What’s behind the growth?
Don’t blame trade restrictions this time. Instead, the three culprits are the credit crunch, the “compositional effect” and the trend away from making an entire product in one country.
