in line with our aggregate—but only experiences in currency and domestic debt crises enter with a significant coefficient. We also note that experience in banking crises enters with a relatively high coefficient, and is statistically insignificant mainly because it is accompanied by correspondingly large standard errors. This latter result may be understood by recognizing the fact that banking crises are generally rather heterogeneous in terms of both context and causes. As a result, banks may acquire mixed experiences as a result of past banking crises, and accordingly respond to them in ways that go beyond contractions in their loan portfolio. These decompositions are reported in Table 4. Columns (D1)–(D4) include, separately, the stock of experience corresponding to each of the four classes of crises in the Reinhart & Rogoff (2009) dataset that are represented in our aggregate crisis experience variable (as described in Subsection 4.1). The most striking result is that every single crisis type has a negative coefficient—in line with our aggregate—but only experiences in currency and domestic debt crises enter with a significant coefficient. We also note that experience in banking crises enters with a relatively high coefficient, and is statistically insignificant mainly because it is accompanied by correspondingly large standard errors. This latter result may be understood by recognizing the fact that banking crises are generally rather heterogeneous in terms of both context and causes. As a result, banks may acquire mixed experiences as a result of past banking crises, and accordingly respond to them in ways that go beyond contractions in their loan portfolio. These decompositions are reported in Table 4. Columns (D1)–(D4) include, separately, the stock of experience corresponding to each of the four classes of crises in the Reinhart & Rogoff (2009) dataset that are represented in our aggregate crisis experience variable (as described in Subsection 4.1). The most striking result is that every single crisis type has a negative coefficient— in line with our aggregate—but only experiences in currency and domestic debt crises enter with a significant coefficient. We also note that experience in banking crises enters with a relatively high coefficient, and is statistically insignificant mainly because it is accompanied by correspondingly large standard errors. This latter result may be understood by recognizing the fact that banking crises are generally rather heterogeneous in terms of both context and causes. As a result, banks may acquire mixed experiences as a result of past banking crises, and accordingly respond to them in ways that go beyond contractions in their loan portfolio.

The relative importance of currency crises and domestic debt crises in terms of crisis experience suggests that these sorts of crises offer important learning opportunities, insofar as lending activity is concerned. Currency and domestic debt crises often impose real costs (Caballero & Krishnamurthy 2001), which may or may not always occur with stock market and banking crises. However, there is also the possibility that these crises are especially important because they directly impact bank balance sheets (as opposed to stock market crashes or external debt crises, which would have either a small or indirect impact on bank balance sheets, or banking crises, which affect bank operations across their entire spectrum of operations, not just their lending).

Another approach to decomposing the crisis experience variable is to capture the independent components embedded in the crisis experience measure after stripping out correlated elements within each separate type of crisis experience. We perform this decomposition with principal components analysis (PCA). More specifically, we calculate the proportion-weighted average of the 25