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Financial Crises Explanations, Types, and Implications

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  • Stijn Claessens
  • M. Ayhan Kose

Abstract

This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 13/28.

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Length: 66
Date of creation: 30 Jan 2013
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Handle: RePEc:imf:imfwpa:13/28

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Keywords: Financial crisis; Banking crisis; Asset prices; Business cycles; financial crises; recessions; currency crisis; deposit insurance; global financial crisis; financial liberalization; bank runs; systemic risk; debt crisis; runs on banks; contagion; financial integration; asian financial crisis; crisis probabilities; prudential regulation; rating agencies; currency devaluations; macroeconomic policies; major banking crises; external debt crisis; macro factors; causes of banking crises; financial distress; systemic banking crisis; systemic crisis; pre-crisis; balance of payments crisis; corporate sector; currency depreciation; asset bubbles; crisis management; public debt crisis; connected lending; foreign debt crisis;

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Cited by:
  1. Judith Eidenberger & David Liebeg & Stefan W. Schmitz & Reinhardt Seliger & Michael Sigmund & Katharina Steiner & Peter Strobl & Eva Ubl, 2014. "Macroprudential Supervision: A Key Lesson from the Financial Crisis," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 27, pages 83-94.
  2. Agnello, Luca & Castro, Vitor & Sousa, Ricardo M., 2013. "What determines the duration of a fiscal consolidation program?," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 113-134.

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