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Determinants of the Venezuelan Banking Crisis of the Mid-1990s: An Event History Analysis

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  • Alicia García Herrero

    () (Banco de España and Johns Hopkins University)

Abstract

This paper uses event history analysis to test the significance of several macro-economic and bank-specific variables in explaining bank failures during the Venezuelan banking crisis of the mid-1990s. Poor bank profitability, proxied by a low net interest margin, and low GDP growth are found significant in increasing the probability of bank failure. Other useful indicators, for some model specifications, are the share of nonperforming loans and that of non productive assets to banks’ own funds, which raise the likelihood of crisis. A large amount of bank liquid assets, in turn, reduces the likelihood of failure for some model specifications. The opposite is true for high real deposit rates. Although it could be interpreted, at first sight, as a too restrictive monetary policy, this is not supported by the lack of significance of the real lending rate and, even more so, real money growth, a more direct indicator of the monetary policy stance.

Suggested Citation

  • Alicia García Herrero, 2005. "Determinants of the Venezuelan Banking Crisis of the Mid-1990s: An Event History Analysis," Economía Mexicana NUEVA ÉPOCA, , vol. 0(1), pages 71-115, January-J.
  • Handle: RePEc:emc:ecomex:v:14:y:2005:i:1:p:71-115
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    Keywords

    Venezuela; banking crisis; early indicators;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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