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The banking crisis in Bulgaria in 1996-1997

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  • Peter Ignatiev
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    Abstract

    After a short preface about the importance of the subject, reasons are given for the applicability of the model of Kindleberger and of the models of financial crises in emerging markets to the banking crisis in Bulgaria. The history and scheme of the crisis are considered. The structure of the banking system during the period 1992-1997, concentration of the bank assets and share of the private banks, are analyzed. The characteristics of the economic environment are explained: soft budget constraints, high and variable inflation. Proofs are given that the policy of the Bulgarian National Bank can be estimated as a normal hazard. It is proved that during 1994 and 1995 the capital base of the banking system was negative. Proofs are given that the crisis stands comparison with the Great Depression of the 30's. The basic conclusions of the analysis of the crisis for the economic policy are made: consolidation of institutions, macroeconomic stability, international lender of last resort, restructuring of the financial and real sectors.

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    Bibliographic Info

    Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Thought.

    Volume (Year): (2003)
    Issue (Month): 1 ()
    Pages: 66-88

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    Handle: RePEc:bas:econth:y:2003:i:1:p:66-88

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    1. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc.
    2. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1998. "Prospective Deficits and the Asian Currency Crisis," NBER Working Papers 6758, National Bureau of Economic Research, Inc.
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    6. Michael Berlemann & Kalin Hristov & Nikolay Nenovsky, 2002. "Lending of Last Resort, Moral Hazard and Twin Crises: Lessons from the Bulgarian Financial Crisis 1996/1997," William Davidson Institute Working Papers Series 464, William Davidson Institute at the University of Michigan.
    7. Caballero, Ricardo J. & Krishnamurthy, Arvind, 2001. "International and domestic collateral constraints in a model of emerging market crises," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 513-548, December.
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    9. Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "Paper tigers? A model of the Asian crisis," Research Paper 9822, Federal Reserve Bank of New York.
    10. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    11. Obstfeld, Maurice, 1996. "Models of Currency Crises with Self-fulfilling Features," CEPR Discussion Papers 1315, C.E.P.R. Discussion Papers.
    12. Martin Schneider & Aaron Tornell, 2000. "Balance SHeet Effects, Bailout Guarantees and Financial Crises," NBER Working Papers 8060, National Bureau of Economic Research, Inc.
    13. Philippe AGHION & Philippe BACCHETTA & Abhijit BANERJEE, 1999. "A Simple Model of Monetary Policy and Currency Crises," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9914, Université de Lausanne, Faculté des HEC, DEEP.
    14. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-25, August.
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