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Staying Afloat When the Wind Shifts: External Factors and Emerging-Market Banking Crises

  • Barry Eichengreen
  • Andrew K. Rose

We analyze banking crises using a panel of macroeconomic and financial data for more than one hundred developing countries from 1975 through 1992. We find that banking crises in emerging markets are strongly associated with adverse external conditions. In particular Northern interest rates are strongly associated with the onset of banking crises in developing countries, even after taking into account a host of internal macroeconomic factors. A one percent increase in Northern interest rates is associated with an increase in the probability of Southern banking crises of around three percent. Our results also seem insensitive to the effects of differing exchange rate regimes, external debt burdens and domestic financial structures.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6370.

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Date of creation: Jan 1998
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Publication status: published as Calvo, Guillermo, Maurice Obstfeld, and Rudiger Dornbusch (eds.) Money, Capital Mobility, and Trade: Essays in Honor of Robert A. Mundell. Cambridge, MA: The MIT Press, 2004.
Handle: RePEc:nbr:nberwo:6370
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