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

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. © 2022, Korean Econometric Society. All rights reserved.