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

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  • Barry Eichengreen
  • Andrew K. Rose

Abstract

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.

Suggested Citation

  • Barry Eichengreen & Andrew K. Rose, 1998. "Staying Afloat When the Wind Shifts: External Factors and Emerging-Market Banking Crises," NBER Working Papers 6370, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:6370
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    JEL classification:

    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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