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Banking crises in New Zealand - an historical perspective

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  • Chris Hunt

    (Reserve Bank of New Zealand)

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    Abstract

    This article examines ‘systemic’ banking crises in New Zealand. While there are examples of individual institutional failures in New Zealand’s early colonial development for example, there are only two episodes that have involved a significant erosion of banking system capital – our definition of a systemic banking crisis. The first episode occurred in the late 1880s and early 1890s after a credit-fuelled rural land boom in the 1870s, while the second occurred in the late 1980s as a result of another credit-driven asset price boom and bust cycle following financial deregulation earlier in the decade. Both episodes can be understood within a framework that places at centre stage the propensity for economic agents to under-price risk, thereby creating balance sheet vulnerabilities for financial intermediaries, which can occasionally erupt into financial panic and crisis.

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    File URL: http://www.rbnz.govt.nz/research_and_publications/reserve_bank_bulletin/2009/2009dec72_4hunt.pdf
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    Bibliographic Info

    Article provided by Reserve Bank of New Zealand in its journal Reserve Bank of New Zealand Bulletin.

    Volume (Year): 72 (2009)
    Issue (Month): (December)
    Pages: 26-41

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    Handle: RePEc:nzb:nzbbul:dec2009:4

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    1. Cecchetti, Stephen G & Kohler, Marion & Upper, Christian, 2009. "Financial Crises and Economic Activity," CEPR Discussion Papers 7495, C.E.P.R. Discussion Papers.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," CEMA Working Papers 595, China Economics and Management Academy, Central University of Finance and Economics.
    3. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1994. "The Financial Accelerator and the Flight to Quality," NBER Working Papers 4789, National Bureau of Economic Research, Inc.
    4. Elena Loukoianova & Gianni De Nicoló & John H. Boyd, 2009. "Banking Crises and Crisis Dating: Theory and Evidence," IMF Working Papers 09/141, International Monetary Fund.
    5. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-72, May.
    6. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    7. Charles W. Calomiris, 2009. "Banking Crises and the Rules of the Game," Working Papers 2009/14, Czech National Bank, Research Department.
    8. Reinhart, Carmen, 2008. "Eight Hundred Years of Financial Folly," MPRA Paper 11864, University Library of Munich, Germany.
    9. Claudio Borio & Claudio Mathias Drehmann, 2009. "Towards an operational framework for financial stability: "fuzzy" measurement and its consequences," BIS Working Papers 284, Bank for International Settlements.
    10. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "Banking Crises: An Equal Opportunity Menace," NBER Working Papers 14587, National Bureau of Economic Research, Inc.
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