Central and Eastern European countries in the global financial crisis: a typical twin crisis?
This article shows that during the Great Recession banking and currency crises occurred simultaneously in Central and Eastern Europe. Events, however, differed widely from what happened during the Asian crisis that usually serves as the model case for the concept of twin crises. We look at three elements that help to explain the nature of events in Central and Eastern Europe: the problem of currency mismatches, the relation between currency and banking crises and the importance of multinational banks for financial stability. We show that theoretical considerations concerning internal capital markets of multinational banks help us understand what happened on capital markets and in the financial sector of the region. We discuss opposing effects of multinational banking on financial stability and find that institutional differences are the key to understanding different effects of the global financial crisis. In particular, we argue that it matters whether international activities are organised by subsidiaries or by cross-border financial services, how large the share of foreign currency-denominated credit is and whether the exchange rate is fixed or flexible. Based on these three criteria we give an explanation why the pattern of the crisis in the Baltic countries differed markedly from that in Poland and the Czech Republic, the two largest countries of the region.
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.
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.
Volume (Year): 23 (2011)
Issue (Month): 4 (April)
|Contact details of provider:|| Web page: http://www.tandfonline.com/CPCE20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/CPCE20|
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.:
- Giovanni Dell'Ariccia & Robert Marquez, 2010.
"Risk and the Corporate Structure of Banks,"
Journal of Finance,
American Finance Association, vol. 65(3), pages 1075-1096, 06.
- Diemo Dietrich, 2004.
"Financing FDI into Developing Economies and the International Transmission of Business Cycle Fluctuations,"
Swiss Journal of Economics and Statistics (SJES),
Swiss Society of Economics and Statistics (SSES), vol. 140(IV), pages 449-481, December.
- Diemo Dietrich, 2003. "Investment Behaviour of Financially Constrained Multinational," Macroeconomics 0309008, EconWPA.
- Diemo Dietrich, 2002. "Investment Behaviour of Financially Constrained Multinational Corporations: Consequences for the International Transmission of Business Cycle Fluctuations," IWH Discussion Papers 165, Halle Institute for Economic Research.
- Grüner, Hans Peter & Fecht, Falko, 2006.
"Limits to international banking consolidation,"
Discussion Paper Series 2: Banking and Financial Studies
2006,11, Deutsche Bundesbank, Research Centre.
- Graciela L. Kaminsky & Carmen M. Reinhart, 1996.
"The twin crises: the causes of banking and balance-of-payments problems,"
International Finance Discussion Papers
544, Board of Governors of the Federal Reserve System (U.S.).
- Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
- Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
- 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.
- Dietrich, Diemo, 2007.
"Asset tangibility and capital allocation,"
Journal of Corporate Finance,
Elsevier, vol. 13(5), pages 995-1007, December.
- Diemo Dietrich, 2006. "Asset Tangibility and Capital Allocation within Multinational Corporations," IWH Discussion Papers 4, Halle Institute for Economic Research.
- repec:zbw:iwhwiw:15-02-2 is not listed on IDEAS
- Helpman, Elhanan, 2006.
"Trade, FDI and the Organization of Firms,"
CEPR Discussion Papers
5589, C.E.P.R. Discussion Papers.
- Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," NBER Working Papers 12091, National Bureau of Economic Research, Inc.
- Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Harvard Institute of Economic Research Working Papers 2118, Harvard - Institute of Economic Research.
- Jeremy C. Stein, 1995.
"Internal Capital Markets and the Competition for Corporate Resources,"
NBER Working Papers
5101, National Bureau of Economic Research, Inc.
- Stein, Jeremy C, 1997. " Internal Capital Markets and the Competition for Corporate Resources," Journal of Finance, American Finance Association, vol. 52(1), pages 111-33, March.
- Diemo Dietrich & Uwe Vollmer, 2010.
"International Banking and Liquidity Allocation,"
Journal of Financial Services Research,
Springer;Western Finance Association, vol. 37(1), pages 45-69, February.
- Diemo Dietrich & Uwe Vollmer, 2006. "Banks’ Internationalization Strategies: The Role of Bank Capital Regulation," IWH Discussion Papers 18, Halle Institute for Economic Research.
- Jeremy C. Stein, 2002. "Information Production and Capital Allocation: Decentralized versus Hierarchical Firms," Journal of Finance, American Finance Association, vol. 57(5), pages 1891-1921, October.
- Michael Hutchison & Ilan Noy, 2002.
"How bad are twins? output costs of currency and banking crises,"
Pacific Basin Working Paper Series
2002-02, Federal Reserve Bank of San Francisco.
- Hutchison, Michael M & Noy, Ilan, 2005. "How Bad Are Twins? Output Costs of Currency and Banking Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 725-52, August.
- Michael M. Hutchison & Ilan Neuberger, . "How Bad Are Twins? Output Costs of Currency and Banking Crises," EPRU Working Paper Series 02-09, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- Cerutti, Eugenio & Dell'Ariccia, Giovanni & Martinez Peria, Maria Soledad, 2005.
"How banks go abroad : branches or subsidiaries ?,"
Policy Research Working Paper Series
3753, The World Bank.
- repec:zbw:iwhdps:19-06 is not listed on IDEAS
- Gray, Jean M. & Gray, H. Peter, 1981. "The multinational bank: A financial MNC?," Journal of Banking & Finance, Elsevier, vol. 5(1), pages 33-63, March.
- de Haas, Ralph & van Lelyveld, Iman, 2006.
"Foreign banks and credit stability in Central and Eastern Europe. A panel data analysis,"
Journal of Banking & Finance,
Elsevier, vol. 30(7), pages 1927-1952, July.
- Ralph de Haas & Iman van Lelyveld, 2003. "Foreign Banks and Credit Stability in Central and Eastern Europe: A Panel Data Analysis," DNB Staff Reports (discontinued) 109, Netherlands Central Bank.
- Dietrich, Diemo & Lindner, Axel, 2002. "Währungspolitische Lehren aus dem Scheitern des argentinischen Currency board," Wirtschaft im Wandel, Halle Institute for Economic Research (IWH), vol. 8(15), pages 463-469.
- Dietrich, Diemo & Jindra, Björn, 2010. "Corporate governance in the multinational enterprise: A financial contracting perspective," International Business Review, Elsevier, vol. 19(5), pages 446-456, October.
- Buch, Claudia M. & Lipponer, Alexander, 2007. "FDI versus exports: Evidence from German banks," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 805-826, March.
- Tobias Knedlik & Rolf Scheufele, 2008. "Forecasting Currency Crises: Which Methods Signaled The South African Crisis Of June 2006?," South African Journal of Economics, Economic Society of South Africa, vol. 76(3), pages 367-383, 09.
- Elisabetta Falcetti & Merxe Tudela, 2008. "What do Twins Share? A Joint Probit Estimation of Banking and Currency Crises," Economica, London School of Economics and Political Science, vol. 75(298), pages 199-221, 05.
- Roman Inderst & Holger M. Müller, 2003. "Internal versus External Financing: An Optimal Contracting Approach," Journal of Finance, American Finance Association, vol. 58(3), pages 1033-1062, 06.
- Reuven Glick & Ramon Moreno & Mark M. Spiegel, 2001. "Financial crises in emerging markets," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue mar.23.
- De Haas, Ralph & Naaborg, Ilko, 2006. "Foreign banks in transition countries. To whom do they lend and how are they financed?," MPRA Paper 6320, University Library of Munich, Germany.
When requesting a correction, please mention this item's handle: RePEc:taf:pocoec:v:23:y:2011:i:4:p:415-432. 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: (Michael McNulty)
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.