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The Determinants of Banking Crises; Evidence From Developing and Developed Countries

  • Asli Demirgüç-Kunt
  • Enrica Detragiache

The paper studies the factors associated with the emergence of systemic banking crises in a large sample of developed and developing countries in 1980–94, using a multivariate logit econometric model. The results suggest that crises tend to erupt when the macroeconomic environment is weak, particularly when growth is low and inflation is high. Also, high real interest rates are clearly associated with systemic banking sector problems, and there is some evidence that vulnerability to balance of payments crises has played a role. Countries with an explicit deposit insurance scheme were particularly at risk, as were countries with weak law enforcement.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 97/106.

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Length: 31
Date of creation: 01 Sep 1997
Date of revision:
Handle: RePEc:imf:imfwpa:97/106
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  1. Maurice Obstfeld & Kenneth Rogoff, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall.
  2. 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.
  3. Diaz-Alejandro, Carlos, 1985. "Good-bye financial repression, hello financial crash," Journal of Development Economics, Elsevier, vol. 19(1-2), pages 1-24.
  4. G. G. Garcia, 1996. "Deposit Insurance; Obtaining the Benefits and Avoiding the Pitfalls," IMF Working Papers 96/83, International Monetary Fund.
  5. May Y Khamis, 1996. "Credit and Exchange Rate-Based Stabilization," IMF Working Papers 96/51, International Monetary Fund.
  6. Gary Gorton, 1986. "Banking panics and business cycles," Working Papers 86-9, Federal Reserve Bank of Philadelphia.
  7. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1994. "The Capital Inflows Problem: Concepts And Issues," Contemporary Economic Policy, Western Economic Association International, vol. 12(3), pages 54-66, 07.
  8. Frederic S. Mishkin, 1996. "Understanding Financial Crises: A Developing Country Perspective," NBER Working Papers 5600, National Bureau of Economic Research, Inc.
  9. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  10. Guillermo A. Calvo, 1996. "Capital flows and macroeconomic management: tequila lessons," Working Papers in Applied Economic Theory 96-02, Federal Reserve Bank of San Francisco.
  11. Julio A. Santaella & Malcolm D. Knight, 1994. "Economic Determinants of Fund Financial Arrangements," IMF Working Papers 94/36, International Monetary Fund.
  12. Huw Pill & Mahmood Pradhan, 1995. "Financial Indicators and Financial Change in Africa and Asia," IMF Working Papers 95/123, International Monetary Fund.
  13. Joseph E. Stiglitz, 1972. "Some Aspects of the Pure Theory of Corporate Finance: Bankruptcies and Take-Overs," Bell Journal of Economics, The RAND Corporation, vol. 3(2), pages 458-482, Autumn.
  14. Burkhard Drees & Ceyla Pazarbasioglu, 1995. "The Nordic Banking Crises; Pitfalls in Financial Liberalization?," IMF Working Papers 95/61, International Monetary Fund.
  15. Mathias Dewatripont & Jean Tirole, 1994. "The prudential regulation of banks," ULB Institutional Repository 2013/9539, ULB -- Universite Libre de Bruxelles.
  16. Vicente Galbis, 1995. "Financial Sector Reforms in Eight Countries; Issues and Results," IMF Working Papers 95/141, International Monetary Fund.
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