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Investigating the Early Signals of Banking Sector Vulnerabilities in Central and East European Emerging Markets

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  • Kadri Männasoo
  • David G Mayes

Abstract

This paper considers the joint role of macro-economic and bankspecific factors in explaining the occurrence of banking problems in the twenty-one Central and East European emerging markets over the recent decade. Using data at the individual bank level we show, using a logit model, that the macroeconomic factors play a central role in determining banking sector instability in the early stages of difficulty, while the bankspecific factors are more important in the later stages and gain more weight as the banking sector develops and the institutional framework becomes mature.

Suggested Citation

  • Kadri Männasoo & David G Mayes, 2005. "Investigating the Early Signals of Banking Sector Vulnerabilities in Central and East European Emerging Markets," Bank of Estonia Working Papers 2005-08, Bank of Estonia, revised 10 Oct 2005.
    • Handle: RePEc:eea:boewps:wp2005-08
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    References listed on IDEAS

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    1. Hutchison, Michael & McDill, Kathleen, 1999. "Are All Banking Crises Alike? The Japanese Experience in International Comparison," Journal of the Japanese and International Economies, Elsevier, vol. 13(3), pages 155-180, September.
    2. Brenda González-Hermosillo & Ceyla Pazarbaşioğlu & Robert Billings, 1997. "Determinants of Banking System Fragility: A Case Study of Mexico," IMF Staff Papers, Palgrave Macmillan, vol. 44(3), pages 295-314, September.
    3. Ms. Brenda Gonzalez-Hermosillo, 1999. "Determinants of Ex-Ante Banking System Distress: A Macro-Micro Empirical Exploration of Some Recent Episodes," IMF Working Papers 1999/033, International Monetary Fund.
    4. David G. Mayes & Liisa Halme & Aarno Liuksila, 2001. "Improving Banking Supervision," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-28819-5.
    5. Demirguc-Kent, Asli & Detragiache, Enrica, 1998. "Financial liberalization and financial fragility," Policy Research Working Paper Series 1917, The World Bank.
    6. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mejra Festić & Sebastijan Repina & Alenka Kavkler, 2009. "The Up-Coming Crisis and the Banking Sector in the Baltic States," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 145(III), pages 269-291, September.
    2. Stelios Markoulis & Panagiotis Ioannou & Spiros Martzoukos, 2023. "Bank distress in the European Union 2008–2015: A closer look at capital, size and revenue diversification," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 792-820, January.
    3. Renata Karkowska, 2015. "The role of investment banking in systemic risk profiles. Evidence from a panel of EU banking sectors," Faculty of Management Working Paper Series 22015, University of Warsaw, Faculty of Management.
    4. Malgorzata Olszak & Mateusz Pipien & Iwona Kowalska & Sylwia Roszkowska, 2015. "The impact of capital on lending in publicly-traded and privately- held banks in the EU," Faculty of Management Working Paper Series 72015, University of Warsaw, Faculty of Management.
    5. Daley, J. & Matthews, K. & Whitfield, K., 2008. "Too-big-to-fail: Bank failure and banking policy in Jamaica," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(3), pages 290-303, July.
    6. repec:erf:erfstu:78 is not listed on IDEAS

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    More about this item

    Keywords

    banking sector vulnerability; banking crises; early warning indicators; Central and Eastern Europe;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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