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The banking crisis in Bulgaria in 1996-1997

  • Peter Ignatiev
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    After a short preface about the importance of the subject, reasons are given for the applicability of the model of Kindleberger and of the models of financial crises in emerging markets to the banking crisis in Bulgaria. The history and scheme of the crisis are considered. The structure of the banking system during the period 1992-1997, concentration of the bank assets and share of the private banks, are analyzed. The characteristics of the economic environment are explained: soft budget constraints, high and variable inflation. Proofs are given that the policy of the Bulgarian National Bank can be estimated as a normal hazard. It is proved that during 1994 and 1995 the capital base of the banking system was negative. Proofs are given that the crisis stands comparison with the Great Depression of the 30's. The basic conclusions of the analysis of the crisis for the economic policy are made: consolidation of institutions, macroeconomic stability, international lender of last resort, restructuring of the financial and real sectors.

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    Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Thought.

    Volume (Year): (2003)
    Issue (Month): 1 ()
    Pages: 66-88

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    Handle: RePEc:bas:econth:y:2003:i:1:p:66-88
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    1. 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.
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    11. Martin Schneider & Aaron Tornell, 2000. "Balance SHeet Effects, Bailout Guarantees and Financial Crises," NBER Working Papers 8060, National Bureau of Economic Research, Inc.
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