A/HRC/31/60 2014 provides a solid case that lower inequality is robustly correlated with faster and more durable growth.61 A further IMF study supports these conclusions using a sample of 159 advanced, emerging and developing economies. The authors conclude that the income distribution itself matters for growth. Specifically, if the income share of the top 20 per cent increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20 per cent is associated with higher GDP growth. 62 B. Impact of financial and sovereign debt crisis on inequalities 39. Financial crises generally have enormous distributional consequences, originating in several factors. 1. Decline in economic output 40. To start with, financial crises may massively hamper economic growth, principally because of decline in investment in production, as a result of credit contraction. Banking crises usually lead to a significant output drop. On average, the real per capita GDP drop amounts to over 9 per cent, with a recovery time of two years.63An analysis of financial crises, taking into account both banking and currency crises, has revealed that the average output loss is 20 per cent of GDP, with a recovery time of three to four years.64 However, isolated currency crises as such may have mixed effects: they usually increase the price of imported goods and may lead to a contraction of available credit, considerably encumbering growth. At the same time, currency crises may also benefit the exporting sector of a country. 41. The consequences of sovereign-debt crisis on economic growth are difficult to isolate, as they are generally preceded by or coincide with banking crises. However, there is a strong negative correlation between extreme levels of sovereign debt or sovereign default on the one hand and growth on the other. One study, for example, has found that debt crises lead to significant and long-lasting output losses, reducing output by about 10 per cent after eight years.65 61 62 63 64 65 See J. Ostry, J. Berg and C.G. Tsangarides, “Redistribution, inequality and growth”, IMF staff discussion note No. 14/02 (2014). See E. Dabla-Norris et al, “Causes and consequences of income inequality: a global perspective”, IMF staff discussion note No. 15/13 (2015). See C.M. Reinhart and K.S. Rogoff, “The aftermath of financial crises”, American Economic Review, vol. 99 No. 2 (2009), pp. 466-72. See M.D. Bordo et al, “Is the crisis problem growing more severe?”, Economic Policy Vvl. 16 No. 32 (2001), pp. 51-82. The authors also demonstrate that banking and currency crises have become more frequent in the last quarter of the twentieth century. See D. Furceri and A. Zdzienicka, “How costly are debt crises?”, Journal of International Money and Finance, vol. 31, No. 4 (2012), pp. 726-742; see also F. Sturzenegger, “Toolkit for the analysis of debt problems”, Journal of Restructuring Finance, vol. 1 No. 1 (2004), pp. 201-03; and B. De Paoli, and G. Hoggarth, “Costs of sovereign default”, Bank of England Quarterly Bulletin, (Q3, 2006), finding negative correlations between sovereign default and growth. Although some researchers interpret sovereign default as the beginning of economic recovery, for example, E. Levy Yeyati and U. Panizza, “The elusive costs of sovereign defaults”, Journal of Development Economics, vol. 94 No. 1 (2011), pp. 95-105, this does not contradict the finding that high increasing levels of sovereign debt may hamper economic growth, as “the anticipation of a default causes low growth”, ibid. 13