IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Banking and Currency Crises in Bulgaria: 1996 - 1997

  • Preslava Kovatchevska
Registered author(s):

    The paper examines the nature of the Bulgarian banking and currency crises in 1996.1997 and evaluates the causal link between them. The analysis shows that the banking crisis has resulted from slow structural reforms, inefficient prudential regulation and prolonged unsound lending practices. The probit model estimates illustrate that excessive credit, augmented interest rate spread and overvalued exchange rate exacerbated the banks' liquidity position. The currency crisis was a consequence of expansionary monetary policy, which led to irreversible depletion of international reserves and caused eventual collapse of the exchange rate. The probit estimations found real exchange rate, money multiplier, interest rate, current account balance, ratio of broad money to reserves and credit expansion to be the most relevant indicators of the balance-of-payment crisis. The causal link between the twin crises is explained through expansionary monetary policy that comes as a response to the banking crisis. It focuses on the inability of the central bank to sustain the exchange rate when it faces a run on its reserves.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.case-research.eu/upload/publikacja_plik/SA204.pdf
    Download Restriction: no

    Paper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 0204.

    as
    in new window

    Length: 40 Pages
    Date of creation: 2000
    Date of revision:
    Handle: RePEc:sec:cnstan:0204
    Contact details of provider: Postal: Aleja Jana Pawla II, 61, 01-031 Warsaw
    Phone: +48 22 206 29 00
    Fax: +48 22 206 29 01
    Web page: http://www.case-research.eu/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1995. "The Collapse of the Mexican Peso: What Have We Learned?," NBER Working Papers 5142, National Bureau of Economic Research, Inc.
    2. Roberto Chang & Andres Velasco, 1998. "Financial Fragility and the Exchange Rate Regime," NBER Working Papers 6469, National Bureau of Economic Research, Inc.
    3. Blackburn, Keith & Sola, Martin, 1993. " Speculative Currency Attacks and Balance of Payments Crises," Journal of Economic Surveys, Wiley Blackwell, vol. 7(2), pages 119-44, June.
    4. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    5. Maurice Obstfeld, 1984. "Rational and Self-Fulfilling Balance-of-Payments Crises," NBER Working Papers 1486, National Bureau of Economic Research, Inc.
    6. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
    7. Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
    8. Patrick Honohan, 1997. "Banking system failures in developing and transition countries: Diagnosis and predictions," BIS Working Papers 39, Bank for International Settlements.
    9. Chang, R. & Velasco, A., 1998. "Financial Crises in Emerging Markets: A Canonical Model," Working Papers 98-21, C.V. Starr Center for Applied Economics, New York University.
    10. 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.
    11. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc.
    12. Ilan Goldfajn & Rodrigo O. Valdés, 1997. "Capital Flows and the Twin Crises ; The Role of Liquidity," IMF Working Papers 97/87, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:sec:cnstan:0204. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Agata Kwiek)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.