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External liabilities, domestic institutions and banking crises in developing economies

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  • Nabila Boukef Jlassi
  • Helmi Hamdi
  • Joseph P. Joyce

Abstract

We investigate the impact of foreign equity and debt on the occurrence of banking crises in 61 lower income and middle income economies during the 1984 to 2010 period. We also focus on the effects of domestic institutions on banking crises and whether they mitigate or exacerbate the impact of the external liabilities. We find that FDI liabilities lower the probability of a crisis, while debt liabilities increase their incidence. However, institutions that lower financial or political risk partially offset the impact of debt liabilities, as does government stability. A decrease in investment risk directly reduces the incidence of banking crises.

Suggested Citation

  • Nabila Boukef Jlassi & Helmi Hamdi & Joseph P. Joyce, 2018. "External liabilities, domestic institutions and banking crises in developing economies," Review of International Economics, Wiley Blackwell, vol. 26(1), pages 96-116, February.
  • Handle: RePEc:bla:reviec:v:26:y:2018:i:1:p:96-116
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    File URL: https://doi.org/10.1111/roie.12305
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    References listed on IDEAS

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    Cited by:

    1. Belke, Ansgar & Domnick, Clemens, 2018. "Trade and capital flows: Substitutes or complements? An empirical investigation," GLO Discussion Paper Series 269, Global Labor Organization (GLO).
    2. Joyce, Joseph P., 2019. "Partners, not debtors: The external liabilities of emerging market economies," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 320-337.
    3. repec:eee:jpolmo:v:40:y:2018:i:4:p:810-826 is not listed on IDEAS
    4. repec:kap:iecepo:v:15:y:2018:i:2:d:10.1007_s10368-017-0406-2 is not listed on IDEAS
    5. Joseph P. Joyce, 2018. "External balance sheets as countercyclical crisis buffers," International Economics and Economic Policy, Springer, vol. 15(2), pages 305-329, April.

    More about this item

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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