by Calculated Risk on 2/09/2008 03:54:00 PM

"For the five most catastrophic cases (which include episodes in Finland, Japan, Norway, Spain and Sweden), the drop in annual output growth from peak to trough is over 5 percent, and growth remained well below pre-crisis trend even after three years. These more catastrophic cases, of course, mark the boundary that policymakers particularly want to avoid."
Carmen Reinhart and Kenneth Rogoff, January 14, 2008

Yesterday Professor Krugman referenced a new paper by Carmen Reinhart and Kenneth Rogoff: Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison

... some highly respected economists are issuing dire warnings. There has been a lot of buzz about a new paper by Carmen Reinhart and Kenneth Rogoff that compares the United States in recent years to other advanced countries that have experienced financial crises. They find that the U.S. profile resembles that of the “big five crises,” ...

Barry Ritholtz at The Big Picture has posted the graphs and added some commentary.

Dr. Krugman comments today in his blog:

Fwiw, these are tres serious economists: Carmen is one of our leading experts on third-world financial crisis, and Ken one of the top international macroeconomists (and former chief economist at the IMF). If they’re worried, you should be too.

Just a little upbeat reading for everyone this weekend.