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Banking Crises in Developing Countries-What Crucial Role of Exchange Rate Stability and External Liabilities?

Author

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  • Brahim Gaies
  • Stéphane Goutte

    (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis)

  • Khaled Guesmi

Abstract

We examine the determinants of banking crises occurrence in developing countries, focusing on the impact of the nature of external liabilities and exchange rate stability. For this purpose, we use a logit panel model, including 67 developing countries observed between 1972 and 2011, as well as a set of alternative estimation methods (logit fixed-effects and probit random-effects) and robustness tests. We find that FDI liabilities reduce the occurrence of banking crises, but debt liabilities increase them. In addition, banking crises occurrence decreases in developing countries with the stability of the exchange rate, real GDP growth, as well as better human capital quality and better political institutions.

Suggested Citation

  • Brahim Gaies & Stéphane Goutte & Khaled Guesmi, 2019. "Banking Crises in Developing Countries-What Crucial Role of Exchange Rate Stability and External Liabilities?," Working Papers hal-01968084, HAL.
    • Handle: RePEc:hal:wpaper:hal-01968084
    Note: View the original document on HAL open archive server: https://hal.science/hal-01968084
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    6. Azmat Gani & Tareq Rasul, 2020. "The Institutional Quality Effect on Credits Provided by the Banks," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(3), pages 249-258, August.
    7. Jahmane, Abderrahmane & Gaies, Brahim, 2020. "Corporate social responsibility, financial instability and corporate financial performance: Linear, non-linear and spillover effects – The case of the CAC 40 companies," Finance Research Letters, Elsevier, vol. 34(C).
    8. Gao, Kaijuan & Lin, Wanfa & Yang, Li & Chan, Kam C., 2020. "The impact of analyst coverage and stock price synchronicity: Evidence from brokerage mergers and closures✰," Finance Research Letters, Elsevier, vol. 33(C).
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    More about this item

    Keywords

    Financial Crises; External Liabilities; Exchange Rate Stability;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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