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What drives financial crises in emerging markets?

Listed author(s):
  • Tuomas Komulainen

    (Bank of Finland Institute for Economies in Transition BOFIT)

  • )

    (University of Helsinki)

  • Johanna Lukkarila

    (University of Helsinki)

Registered author(s):

    The study examines the reasons for financial crises in 31 emerging market countries during 1980-2001. It estimates a probit model using 23 macroeconomic and financial sector variables. Traditional variables such as unemployment and inflation, as well as several indicators of indebtedness such as private sector liabilities and the foreign liabilities of banks explain currency crises rather well, and it appears currency crises occur in tandem with banking crises. Indeed, in emerging market countries vulnerability to crisis is exacerbated by situations involving large liabilities that permit sudden capital outflows. Increases in indebtedness followed the liberalisation of capital flows and domestic financial sectors.

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    File URL: http://econwpa.repec.org/eps/mac/papers/0304/0304010.pdf
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    Paper provided by EconWPA in its series Macroeconomics with number 0304010.

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    Length: 30 pages
    Date of creation: 28 Apr 2003
    Handle: RePEc:wpa:wuwpma:0304010
    Note: Type of Document - pdf; prepared on IBM PC ; to print on HP/PostScript/Franciscan monk; pages: 30 ; figures: included
    Contact details of provider: Web page: http://econwpa.repec.org

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