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Banking crises in New Zealand - an historical perspective


  • Chris Hunt

    (Reserve Bank of New Zealand)


This article examines ‘systemic’ banking crises in New Zealand. While there are examples of individual institutional failures in New Zealand’s early colonial development for example, there are only two episodes that have involved a significant erosion of banking system capital – our definition of a systemic banking crisis. The first episode occurred in the late 1880s and early 1890s after a credit-fuelled rural land boom in the 1870s, while the second occurred in the late 1980s as a result of another credit-driven asset price boom and bust cycle following financial deregulation earlier in the decade. Both episodes can be understood within a framework that places at centre stage the propensity for economic agents to under-price risk, thereby creating balance sheet vulnerabilities for financial intermediaries, which can occasionally erupt into financial panic and crisis.

Suggested Citation

  • Chris Hunt, 2009. "Banking crises in New Zealand - an historical perspective," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 72, pages 26-41, December.
  • Handle: RePEc:nzb:nzbbul:dec2009:4

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    References listed on IDEAS

    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-472, May.
    2. Claudio Borio & Mathias Drehmann, 2011. "Toward an Operational Framework for Financial Stability: “Fuzzy” Measurement and Its Consequences," Central Banking, Analysis, and Economic Policies Book Series,in: Rodrigo Alfaro (ed.), Financial Stability, Monetary Policy, and Central Banking, edition 1, volume 15, chapter 4, pages 063-123 Central Bank of Chile.
    3. Bernanke, Ben & Gertler, Mark & Gilchrist, Simon, 1996. "The Financial Accelerator and the Flight to Quality," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 1-15, February.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
    5. Reinhart, Carmen, 2008. "Eight Hundred Years of Financial Folly," MPRA Paper 11864, University Library of Munich, Germany.
    6. 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.
    7. Elena Loukoianova & Gianni De Nicolo & John H. Boyd, 2009. "Banking Crises and Crisis Dating; Theory and Evidence," IMF Working Papers 09/141, International Monetary Fund.
    8. Reinhart, Carmen M. & Rogoff, Kenneth S., 2013. "Banking crises: An equal opportunity menace," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4557-4573.
    9. Stephen G. Cecchetti & Marion Kohler & Christian Upper, 2009. "Financial crises and economic activity," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 89-135.
    10. Charles Calomiris, 2009. "Banking Crises and the Rules of the Game," NBER Working Papers 15403, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Chris Hunt, 2015. "Economic implications of high and rising household indebtedness," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 78, pages 1-12, March.
    2. Stosic, Darko & Stosic, Dusan & Ludermir, Teresa & de Oliveira, Wilson & Stosic, Tatijana, 2016. "Foreign exchange rate entropy evolution during financial crises," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 449(C), pages 233-239.
    3. Phakawa Jeasakul & Cheng Hoon Lim & Erik J. Lundback, 2014. "Why Was Asia Resilient? Lessons from the Past and for the Future," IMF Working Papers 14/38, International Monetary Fund.

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