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Determinants of the Venezuelan Banking Crisis of the Mid-1990s: An Event History Analysis


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  • Alicia García Herrero

    (Banco de España and Johns Hopkins University)

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    This paper uses event history analysis to test the significance of several macro-economic and bank-specific variables in explaining bank failures during the Venezuelan banking crisis of the mid-1990s. Poor bank profitability, proxied by a low net interest margin, and low GDP growth are found significant in increasing the probability of bank failure. Other useful indicators, for some model specifications, are the share of nonperforming loans and that of non productive assets to banks’ own funds, which raise the likelihood of crisis. A large amount of bank liquid assets, in turn, reduces the likelihood of failure for some model specifications. The opposite is true for high real deposit rates. Although it could be interpreted, at first sight, as a too restrictive monetary policy, this is not supported by the lack of significance of the real lending rate and, even more so, real money growth, a more direct indicator of the monetary policy stance.

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    Bibliographic Info

    Article provided by in its journal Economia Mexicana NUEVA EPOCA.

    Volume (Year): XIV (2005)
    Issue (Month): 1 (January-June)
    Pages: 71-115

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    Handle: RePEc:emc:ecomex:v:14:y:2005:i:1:p:71-115

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    Keywords: Venezuela; banking crisis; early indicators;

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    1. Pettway, Richard H., 1980. "Potential Insolvency, Market Efficiency, and Bank Regulation of Large Commercial Banks," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 15(01), pages 219-236, March.
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    14. James R. Barth & R. Dan Brumbaugh & Daniel Sauerhaft & George H.K. Wang, 1985. "Thrift institution failures: causes and policy issues," Proceedings, Federal Reserve Bank of Chicago 68, Federal Reserve Bank of Chicago.
    15. Sinkey, Joseph F, Jr, 1975. "A Multivariate Statistical Analysis of the Characteristics of Problem Banks," Journal of Finance, American Finance Association, American Finance Association, vol. 30(1), pages 21-36, March.
    16. Linda M. Hooks, 1995. "Bank Asset Risk: Evidence From Early-Warning Models," Contemporary Economic Policy, Western Economic Association International, Western Economic Association International, vol. 13(4), pages 36-50, October.
    17. Richard E. Randall, 1989. "Can the market evaluate asset quality exposure in banks?," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Jul, pages 3-24.
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