IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Pandemics of the poor and banking stability

  • Lagoarde-Segot, Thomas
  • Leoni, Patrick L.

We first develop a theoretical model that shows that the likelihood of a collapse of the banking industry of a developing country increases, as the joint prevalence of large pandemics such as AIDS and malaria increases. We also show that the optimal bank reserves increase as the prevalence increases. In the empirical part of the paper, we consider a large dataset of developing countries, and we exhibit a causality effect from combined prevalence to deposit turnover, as well as causality effect from an increase of combined prevalence to an increase in bank reserves. Those empirical facts therefore support our theoretical findings.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 37 (2013)
Issue (Month): 11 ()
Pages: 4574-4583

in new window

Handle: RePEc:eee:jbfina:v:37:y:2013:i:11:p:4574-4583
DOI: 10.1016/j.jbankfin.2013.04.004
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Cetorelli, Nicola & Peretto, Pietro F., 2000. "Oligopoly Banking and Capital Accumulation," Working Papers 00-19, Duke University, Department of Economics.
  2. Céline Azémar & Rodolphe Desbordes, 2008. "Public Governance, Health and Foreign Direct Investment in Sub-Saharan Africa," Working Papers 2009_04, Business School - Economics, University of Glasgow.
  3. Freixas, X. & Martin, A. & Skeie, D., 2010. "Bank Liquidity, Interbank Markets, and Monetary Policy," Discussion Paper 2010-35S, Tilburg University, Center for Economic Research.
  4. Huberto M. Ennis & Todd Keister, 2003. "Economic growth, liquidity, and bank runs," Working Paper 03-01, Federal Reserve Bank of Richmond.
  5. Reinhart, Carmen & Kaminsky, Graciela, 2000. "Las crisis gemelas: las causas de los problemas bancarios y de balanza de pagos
    [The twin crises: Te causes of banking and balance of payments problems]
    ," MPRA Paper 13842, University Library of Munich, Germany.
  6. Harris, Richard D. F. & Tzavalis, Elias, 1999. "Inference for unit roots in dynamic panels where the time dimension is fixed," Journal of Econometrics, Elsevier, vol. 91(2), pages 201-226, August.
  7. Turk Ariss, Rima, 2010. "On the implications of market power in banking: Evidence from developing countries," Journal of Banking & Finance, Elsevier, vol. 34(4), pages 765-775, April.
  8. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  9. Westerlund, Joakim, 2005. "Testing for Error Correction in Panel Data," Working Papers 2005:11, Lund University, Department of Economics.
  10. Serwa, Dobromil, 2010. "Larger crises cost more: Impact of banking sector instability on output growth," Journal of International Money and Finance, Elsevier, vol. 29(8), pages 1463-1481, December.
  11. Jushan Bai & Serena Ng, 2001. "A PANIC Attack on Unit Roots and Cointegration," Boston College Working Papers in Economics 519, Boston College Department of Economics.
  12. Brock, Philip L, 1989. "Reserve Requirements and the Inflation Tax," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(1), pages 106-21, February.
  13. Alwyn Young, 2005. "The Gift of the Dying: The Tragedy of AIDS and the Welfare of Future African Generations," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 423-466.
  14. Pierre-Richard Agénor & Karim El Aynaoui, 2008. "Excess Liquidity, Bank Pricing Rules, and Monetary Policy," Centre for Growth and Business Cycle Research Discussion Paper Series 105, Economics, The Univeristy of Manchester.
  15. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521709309, November.
  16. Demirguc-Kunt, Asli & Detragiache, Enrica & Gupta, Poonam, 2006. "Inside the crisis: An empirical analysis of banking systems in distress," Journal of International Money and Finance, Elsevier, vol. 25(5), pages 702-718, August.
  17. Lown, Cara S. & Wood, John H., 2003. "The determination of commercial bank reserve requirements," Review of Financial Economics, Elsevier, vol. 12(1), pages 83-98.
  18. Enrica Detragiache & Thierry Tressel & Poonam Gupta, 2008. "Foreign Banks in Poor Countries: Theory and Evidence," Journal of Finance, American Finance Association, vol. 63(5), pages 2123-2160, October.
  19. Poonam Gupta, 2000. "Aftermath of Banking Crises; Effectson Real and Monetary Variables," IMF Working Papers 00/96, International Monetary Fund.
  20. Wagner, Wolf, 2007. "The liquidity of bank assets and banking stability," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 121-139, January.
  21. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
  22. Meza, Felipe & Urrutia, Carlos, 2011. "Financial liberalization, structural change, and real exchange rate appreciations," Journal of International Economics, Elsevier, vol. 85(2), pages 317-328.
  23. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
  24. Demirguc-Kunt, Asli & Detragiache, Enrica, 2009. "Basel core principles and bank soundness : does compliance matter ?," Policy Research Working Paper Series 5129, The World Bank.
  25. Bekaert, Geert & Harvey, Campbell R., 2002. "Research in emerging markets finance: looking to the future," Emerging Markets Review, Elsevier, vol. 3(4), pages 429-448, December.
  26. Giannetti, Mariassunta, 2007. "Financial liberalization and banking crises: The role of capital inflows and lack of transparency," Journal of Financial Intermediation, Elsevier, vol. 16(1), pages 32-63, January.
  27. Christopher A. Sims & Tao Zha, 1995. "Error bands for impulse responses," FRB Atlanta Working Paper 95-6, Federal Reserve Bank of Atlanta.
  28. 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.
  29. Chudik, Alexander & Fratzscher, Marcel, 2011. "Identifying the global transmission of the 2007-09 financial crisis in a GVAR Model," Working Paper Series 1285, European Central Bank.
  30. Chudik, Alexander & Fratzscher, Marcel, 2011. "Identifying the global transmission of the 2007-2009 financial crisis in a GVAR model," European Economic Review, Elsevier, vol. 55(3), pages 325-339, April.
  31. Uhde, André & Heimeshoff, Ulrich, 2009. "Consolidation in banking and financial stability in Europe: Empirical evidence," Journal of Banking & Finance, Elsevier, vol. 33(7), pages 1299-1311, July.
  32. Kazuo Ogawa, 2007. "Why Commercial Banks Held Excess Reserves: The Japanese Experience of the Late 1990s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(1), pages 241-257, 02.
  33. Siegel, Jeremy J, 1981. "Bank Reserves and Financial Stability," Journal of Finance, American Finance Association, vol. 36(5), pages 1073-84, December.
  34. Johansson, Lars M., 2007. "Fiscal implications of AIDS in South Africa," European Economic Review, Elsevier, vol. 51(7), pages 1614-1640, October.
  35. Damiaan Persyn & Joakim Westerlund, 2008. "Error-correction–based cointegration tests for panel data," Stata Journal, StataCorp LP, vol. 8(2), pages 232-241, June.
  36. Sophie Brana & Marie-Louise Djigbenou & Stéphanie Prat, 2012. "Global excess liquidity and asset prices in emerging countries: a pvar approach," Larefi Working Papers 1203, Larefi, Université Bordeaux 4.
  37. John H. Boyd & Gianni De Nicolã, 2005. "The Theory of Bank Risk Taking and Competition Revisited," Journal of Finance, American Finance Association, vol. 60(3), pages 1329-1343, 06.
  38. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2006. "Bank concentration, competition, and crises: First results," Journal of Banking & Finance, Elsevier, vol. 30(5), pages 1581-1603, May.
  39. Baltensperger, Ernst & Milde, Hellmuth, 1976. "Predictability of Reserve Demand, Information Costs, and Portfolio Behavior of Commercial Banks," Journal of Finance, American Finance Association, vol. 31(3), pages 835-43, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:37:y:2013:i:11:p:4574-4583. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.