This paper studies the effects of fiscal policy response in 118 episodes of systemic banking crisis in advanced and emerging market countries during 1980-2008. It finds that timely countercyclical fiscal measures contribute to shortening the length of crisis episodes by stimulating aggregate...

Intro -- Contents -- I. INTRODUCTION -- II. BACKGROUND -- III. THE MODEL -- A. Households -- B. Firms -- C. Government -- D. Domestic Financial Intermediary -- E. Foreign Creditor -- IV. EQUILIBRIUM CONDITIONS -- V. PARAMETERS -- VI. SIMULATIONS -- A. The Base Case -- B. Application of...