At the severe end of the spectrum are major and extreme financial crises. These are
situations where there are large impediments to normal financial intermediation throughout
virtually all of the financial system. We look for such markers as the unreserved use the term
“crisis” in referring to the financial system, and for such terms as “dire,” grave,” “unsound,” and
“paralysis.” We also look for clear-cut statements that the financial-sector disruptions were
having an important effect on credit supply and macroeconomic outcomes. In addition, we view
references to major government interventions as suggesting that the problems were severe.
There are only two episodes in our sample that we classify as major or extreme crises, Japan in