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European Banking Distress and EMU: Institutional and Macroeconomic Risks

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  • Hutchison, Michael M

Abstract

Financial stability in Europe has received renewed attention with the advent of EMU. This paper examines whether EU country banking systems are particularly vulnerable to systemic risk. Our approach is to explore episodes of banking sector distress for a large sample of countries, highlighting the experience of the EU. We estimate multivariate probit models linking the likelihood of banking problems to a set of macroeconomic variables and institutional characteristics such as aspects of bank supervision and regulation, restrictions on bank portfolios, and development of the banking system. Given these characteristics, the model predicts a low probability of banking sector distress in EMU countries. Copyright 2002 by The editors of the Scandinavian Journal of Economics.

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  • Hutchison, Michael M, 2002. " European Banking Distress and EMU: Institutional and Macroeconomic Risks," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(3), pages 365-389, September.
  • Handle: RePEc:bla:scandj:v:104:y:2002:i:3:p:365-89
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    4. 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.
    5. Levine, Ross, 1998. "The Legal Environment, Banks, and Long-Run Economic Growth," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(3), pages 596-613, August.
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    7. Thomas F. Cargill & Michael M. Hutchison & Takatoshi Ito, 1997. "The Political Economy of Japanese Monetary Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032473.
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    Cited by:

    1. Julián Caballero, 2012. "Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises?: Cross-Country Evidence on Bonanzas in Capital Inflows and Bonanza-Boom-Bust Cycles," IDB Publications (Working Papers) 3971, Inter-American Development Bank.
    2. Edward Kane, 2006. "Can the European Community Afford to Neglect the Need for More Accountable Safety-Net Management?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 34(2), pages 127-144, June.
    3. repec:spr:fininn:v:2:y:2016:i:1:d:10.1186_s40854-016-0043-8 is not listed on IDEAS
    4. Martin Cihak & Sonia Munoz & Ryan Scuzzarella, 2012. "The Bright and the Dark Side of Cross-Border Banking Linkages," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(3), pages 200-225, July.
    5. Christian Calmès & Raymond Théoret, 2011. "Bank systemic risk and the business cycle: An empirical investigation using Canadian data," RePAd Working Paper Series UQO-DSA-wp322011, Département des sciences administratives, UQO.
    6. Christian Calmès & Raymond Théoret, 2012. "Bank systemic risk and the business cycle: Canadian and U.S. evidence," RePAd Working Paper Series UQO-DSA-wp022012, Département des sciences administratives, UQO.
    7. Rudolfs Bems & Kristian Jönsson Hartelius, 2006. "Trade Deficits in the Baltic States: How Long Will the Party Last?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 179-209, January.
    8. Tao Sun, 2011. "Identifying Vulnerabilities in Systemically-Important Financial Institutions in a Macro-Financial Linkages Framework," IMF Working Papers 11/111, International Monetary Fund.
    9. Silva, Walmir & Kimura, Herbert & Sobreiro, Vinicius Amorim, 2017. "An analysis of the literature on systemic financial risk: A survey," Journal of Financial Stability, Elsevier, vol. 28(C), pages 91-114.

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