Anatomy of banking crises in developing and emerging market countries

Duttagupta, Rupa; Cashin, Paul

doi:10.1016/j.jimonfin.2010.08.006

Cited by 100 publications

(67 citation statements)

References 19 publications

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“…Generally, the banking crisis estimations also yield results qualitatively consistent with other studies on the same subject (such as Aizenman and Noy, 2012;Demirgüç-Kunt and Detragiache, 1998);von Hagen and Ho, 2007;Joyce, 2011;and Duttagupta and Cashin, 2011), though with varying levels of statistical significance.…”

Section: Banking Crisissupporting

confidence: 87%

The More Divergent, the Better? Lessons on Trilemma Policies and Crises for Asia

Aizenman

Ito

2014

Asian Development Review

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This paper investigates the potential impacts of the degree of divergence in open macroeconomic policies in the context of the trilemma hypothesis. Using an index that measures the extent of policy divergence among the three trilemma policy choices, namely monetary independence, exchange rate stability, and financial openness, we find that emerging market countries have adopted trilemma policy combinations with the smallest degree of policy divergence in the last fifteen years. We then investigate whether and to what extent the degree of open macro policy convergence affects the probability of a crisis and find that a developing or emerging market country with a higher degree of policy divergence is more likely to experience a currency or debt crisis. We also compare the development of trilemma policies around the crisis period for the groups of Latin American crisis countries in the 1980s and the Asian crisis countries in the 1990s. We find that Latin American crisis countries tended to close their capital accounts in the aftermath of a crisis while that is not the case for the Asian crisis countries. The Asian crisis countries tended to reduce the degree of policy divergence in the aftermath of the crisis, which possibly mean that they decided to adopt open macro policies that are less prone for a crisis. JEL Classification Nos.: F31, F36, F41, O24

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Section: Banking Crisissupporting

confidence: 87%

The More Divergent, the Better? Lessons on Trilemma Policies and Crises for Asia

Aizenman

Ito

2014

Asian Development Review

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“…However, in most cases we obtain some non-linearity in the aggregations, such as even in the simple logistic regression. The number of different approaches employed for aggregating indicators into a probability is large, such as classification trees Duttagupta and Cashin [11], logistic regression Lo Duca and Peltonen [26], artificial neural networks Sarlin [40] and k-nearest neighbors Holopainen and Sarlin [18]. The third class of estimation models relies on the combination of methods from the second class through ensemble learning.…”

Section: Systemic Risk Aggregationmentioning

confidence: 99%

RiskRank: Measuring interconnected risk

Mezei

Sarlin

2018

Economic Modelling

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This paper proposes RiskRank as a joint measure of cyclical and cross-sectional systemic risk. RiskRank is a general-purpose aggregation operator that concurrently accounts for risk levels for individual entities and their interconnectedness. The measure relies on the decomposition of systemic risk into sub-components that are in turn assessed using a set of risk measures and their relationships. For this purpose, motivated by the development of the Choquet integral, we employ the RiskRank function to aggregate risk measures, allowing for the integration of the interrelation of different factors in the aggregation process. The use of RiskRank is illustrated through a real-world case in a European setting, in which we show that it performs well in out-of-sample analysis. In the example, we provide an estimation of systemic risk from country-level risk and cross-border linkages.

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“…Joyce (2011), and Duttagupta and Cashin (2011). The list of independent variables we use is: per capita GDP, real GDP growth rate, a binary variable denoting hyperinflation (annual CPI>40), the de facto flexibility of the exchange rate regime, a measure of bank liquidity (deposit money bank assets as % of GDP), credit expansion (growth rate of deposit money bank assets), and the degree of openness of the capital account (the Chinn-Ito de jure index).…”

Section: Model I -Panel Of Country-year Observationsmentioning

confidence: 99%

Macroeconomic adjustment and the history of crises in open economies

Aizenman¹

2013

Journal of International Money and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis paper investigates the impact of the history of crises on macroeconomic performance. We first study the impact of past banking crises on the probability of a future banking crisis. Applying data for 1980-2010 for all countries for which the required information is available, controlling for conventional macro variables and the history of banking crises occurring after 1970, we do not detect a learning process from past banking crises. Countries that have already experienced one banking crisis generally have a higher likelihood of experiencing another crisis; and the depth of the present crisis does not appear to be affected by the previous historical experience with crisis events. Evidence also suggests that, in middle-income countries, higher de jure capital account openness is associated with lower likelihood of a banking crisis, a lower ratio of non-performing loans during the crisis, and higher levels of forgone output in the crisis' aftermath.In contrast, we find that past crisis experience has a significant impact on savings. When facing considerable political risk, the past does seem to matter --countries with more people who were exposed, over their lifetime, to larger disasters will tend to save more. This association, however, does not hold for countries with more stable political systems. We interpret these results as consistent with a differential sectoral adjustment to a crises hypothesis. The private sector, by virtue of its harder budget constraints, adjusts faster, whereas the government adjusts at a slower pace following a crisis. The financial sector may find itself in between the two. The "too big to fail" doctrine associated with large banks provides them with a softer budget constraint, delaying the day of adjustment; for some, delaying bankruptcy. Occasionally, the separation between banks and the public sector is murky, further delaying necessary adjustments of the financial sector.JEL Classification: F36, F41, E2, E4

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Anatomy of banking crises in developing and emerging market countries

Cited by 100 publications

References 19 publications

The More Divergent, the Better? Lessons on Trilemma Policies and Crises for Asia

The More Divergent, the Better? Lessons on Trilemma Policies and Crises for Asia

RiskRank: Measuring interconnected risk

Macroeconomic adjustment and the history of crises in open economies

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