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Bank Runs and Banking Policies: Lessons for African Policymakers

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  • Edward J. Kane
  • Tara Rice

Abstract

This paper documents and explains the near-permanent banking stress African countries have experienced during the last 20 years. The central hypothesis is that banking stress comes predominantly from unbooked losses and that the level of unbooked losses a banking system can accumulate depends on its information environment and on the effectiveness of government efforts to supervise and guarantee bank solvency. African depositors face high costs for mitigating the loss exposures that banks and regulators impose on them and African regulators have not been made accountable for these costs. We present evidence that over 1980-99 the average length of time an African banking system spent in crisis increased with the level of government corruption.

Suggested Citation

  • Edward J. Kane & Tara Rice, 2000. "Bank Runs and Banking Policies: Lessons for African Policymakers," NBER Working Papers 8003, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:8003
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    References listed on IDEAS

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    1. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    2. Asli Demirgüç-Kunt & Enrica Detragiache, 1997. "The Determinants of Banking Crises; Evidence From Developing and Developed Countries," IMF Working Papers 97/106, International Monetary Fund.
    3. Dani Rodrik, 1998. "Trade Policy and Economic Performance in Sub-Saharan Africa," NBER Working Papers 6562, National Bureau of Economic Research, Inc.
    4. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    5. Claessens, Stijn & Demirguc-Kunt, Asli & Huizinga, Harry, 1998. "How does foreign entry affect the domestic banking market?," Policy Research Working Paper Series 1918, The World Bank.
    6. Bird, Graham & Hussain, Mumtaz & Joyce, Joseph P., 2004. "Many happy returns? Recidivism and the IMF," Journal of International Money and Finance, Elsevier, vol. 23(2), pages 231-251, March.
    7. Ncube, Mthuli & Senbet, Lemma W, 1997. "Perspectives on Financial Regulation and Liberalisation in Africa under Incentive Problems and Asymmetric Information," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 29-88, March.
    8. Abdelali Jbili, 1997. "Financial Sector Reforms in Algeria, Morocco, and Tunisia; A Preliminary Assessment," IMF Working Papers 97/81, International Monetary Fund.
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    Cited by:

    1. Thomas Barnebeck Andersen & Finn Tarp, 2003. "Financial liberalization, financial development and economic growth in LDCs," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(2), pages 189-209.
    2. Saubhik Deb, 2006. "Output Growth, Capital Flow Reversals and Sudden stop Crises," Departmental Working Papers 200606, Rutgers University, Department of Economics.
    3. Fofack, Hippolyte L., 2005. "Nonperforming loans in Sub-Saharan Africa : causal analysis and macroeconomic implications," Policy Research Working Paper Series 3769, The World Bank.
    4. Aykut Kibritcioglu, 2002. "Monitoring Banking Sector Fragility," Macroeconomics 0206004, EconWPA, revised 17 Mar 2006.
    5. 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.

    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • G2 - Financial Economics - - Financial Institutions and Services

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