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Excessive Risk-Taking, Banking Sector Fragility, and Banking Crises

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  • Kibritcioglu, Aykut

    (U of Illinois at Urbana-Champaign)

Abstract

In the financial crisis literature, it is usually argued that, contrary to the case of currency crises, construction of a time series index to identify banking crisis episodes is highly difficult, particularly because of the lack of reliable data on banking sector variables such as the level of non-performing loans. Accordingly, existing methods used to pinpoint banking crisis years are generally event-based, such as that used by Caprio and Klingebiel (1996 and 1999) and Lindgren et al. (1996). This paper, however, proposes a weighted banking sector fragility index to measure the changes in banks' vulnerability to crisis. Using monthly sectoral data for selected 22 countries, it is argued that this type of a fragility index seems to be highly useful in measurement and monitoring of banking sector fragility.

Suggested Citation

  • Kibritcioglu, Aykut, 2002. "Excessive Risk-Taking, Banking Sector Fragility, and Banking Crises," Working Papers 02-0114, University of Illinois at Urbana-Champaign, College of Business.
    • Handle: RePEc:ecl:illbus:02-0114
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    7. Taha Zaghdoudi, 2013. "Bank Failure Prediction with Logistic Regression," International Journal of Economics and Financial Issues, Econjournals, vol. 3(2), pages 537-543.

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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