Can Lessons Learned from Past Economic Crises Help Predict Future Economic Crises?*

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    1 Citation (Scopus)

    Abstract

    Based on experience of Korea’s two recent economic crises in 1997 and 2008, we investigate if lessons learned from past economic crises can help predict future economic crises. Using the least absolute shrinkage and selection operator (lasso)-logit model, we find that the symptoms in the pre-1997 crisis period do not appear before the 2008 crisis. This finding suggests that the 2008 crisis could not be predicted using lessons learned from the precedent crisis. We also attempted to answer an even more hypothetical question of whether the first crisis could have been predicted if lessons from the second crisis had already leaned. Our findings suggest that the 1997 crisis could have been predicted using lessons learned from the 2008 crisis. Overall, our findings imply that factors that cause the future crisis encompass those of the past crisis, but it is difficult to predict a future crisis armed only with experience of a past crisis.

    Original languageEnglish
    Pages (from-to)96-111
    Number of pages16
    JournalJournal of Economic Theory and Econometrics
    Volume33
    Issue number2
    Publication statusPublished - 2022 Jun

    Bibliographical note

    Funding Information:
    *The authors offer thanks to Professor Dongheon Kim for providing information on data. Research by Han was supported by Korea University (K1810141). †Department of Economics, Korea University, E-mail: [email protected] ‡Corresponding author. Department of Economics, Korea University, E-mail: khshin@korea. ac.kr

    Publisher Copyright:
    © 2022, Korean Econometric Society. All rights reserved.

    Keywords

    • E32
    • G01
    • JEL Classification Economic Crises
    • Lasso
    • Lessons
    • Logit
    • Prediction. E17

    ASJC Scopus subject areas

    • Economics and Econometrics

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