External Shocks and Banking Crises in Developing Countries: Does the Exchange Rate Regime Matter?

Mendis, Chandima

doi:10.2139/ssrn.341360

Cited by 32 publications

(6 citation statements)

References 7 publications

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“…Based on the literature, the interconnection between public policies and economic activities is not a novel concept, as there is an established relationship between government policies and economy performance (Wallerstein, 1974;Skocpol, 1977). In addition, it has been emphasized that economic disruptions (or crises) (Jones, 2016); market failure (Stiglitz, 2008;Petrakos, 2014), civil unrest through protests (Bernburg, 2016;Grasso and Giugni, 2016); external trade and commodity prices shocks (Gomulka and Lane, 1997;Mendis, 2002;Francois and Woerz, 2009), are often induced by various policies interventions embarked upon by governments. Public policies matter to all individuals irrespective of socio-economic status.…”

Section: Empirical Reviewmentioning

confidence: 99%

COVID-19 and sustainable development goals (SDGs): An appraisal of the emanating effects in Nigeria

Fagbemi

2021

Research in Globalization

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Section: Empirical Reviewmentioning

confidence: 99%

COVID-19 and sustainable development goals (SDGs): An appraisal of the emanating effects in Nigeria

Fagbemi

2021

Research in Globalization

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“…11. See Sachs, Tornell, andVelasco (1996), Eichengreen and Rose (1998), Radelet andSachs (1998), Fernández-Arias andHausmann (2001), Arteta (2002), andMendis (2002).…”

Section: Capital Inflows Lending Booms and Banking Instabilitymentioning

confidence: 99%

Capital Inflow Surges in Emerging Economies: How Worried Should Latin America and the Caribbean Be?

Powell¹,

Tavella

2015

lse-j-elaceaj

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In the years leading up to the global economic crisis, Latin America and the Caribbean received large capital inflows. Nonetheless, the region survived the (albeit short-lived) dramatic events of 2007-09 reasonably well, with no financial crisis in any of the larger economies. After the crisis, capital inflows rose again: in 2010 gross inflows to seven Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela) amounted to more than 6 percent of gross domestic product (GDP), and net inflows exceeded 3 percent of GDP. More recently following the May 2013 speech of then-Chairman of the U.S. Federal Reserve, Ben Bernanke, there has been concern regarding the potential effects of tapering asset purchases by the U.S. Federal Reserve System and rising interest rates, possibly spelling the end of large capital inflows to the Latin American and Caribbean region.The literature on capital inflows suggests that while these flows represent an opportunity to spur investment and growth, they may also increase vulnerability to financial crises, macroeconomic instability, and ultimately recession. A relevant question, then, is whether the region can declare victory in being able to manage large capital inflows successfully or whether risks remain that justify strong measures.

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“…Similarly, Furceri et al (2011a) report a positive response of credit to the private sector after the start of a capital inflow bonanza after computing impulse responsive functions; however, their method does not permit the discernment of contemporaneous causal relations (see Jorda, 2005, p. 163). Eichengreen and Rose (1998), Radelet and Sachs (1998), Fernández-Arias and Hausmann (2001), Eichengreen and Arteta (2002), and Mendis (2002). The evidence on the current account balance is also mixed: although Barrell and Davis (2010) find a significant effect of the current account balance in a regression of banking crises in the period 1980-2008 for OECD countries, Jorda et al (2011) find the opposite once they control for credit growth in a much larger sample of 14 developed economies in the period 1870-2008. The literature has had a bit more success at linking banking crises and the stock of foreign liabilities, especially debt, but it is still far from conclusive.…”

Section: Introductionmentioning

confidence: 97%

Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises?: Cross-Country Evidence on Bonanzas in Capital Inflows and Bonanza-Boom-Bust Cycles

Caballero

2012

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This paper asks whether bonanzas (surges) in net capital inflows increase the probability of banking crises and whether this is necessarily through a lending boom mechanism. A fixed effects regression analysis indicates that a baseline bonanza, identified as a surge of one standard deviation from trend, increases the odds of a banking crisis by three times, even in the absence of a lending boom. Thus, a bonanza raises the likelihood of a crisis from an unconditional probability of 4.4 percent to 12 percent. Larger windfalls of capital (two-s.d. bonanzas) increase the odds of a crisis by eight times. The joint occurrence of a bonanza and a lending boom raises these odds even more. Decomposing flows into FDI, portfolio-equity and debt indicates that bonanzas in all flows increase the probability of crises when the windfall takes place jointly with a lending boom. Thus, windfalls in all types of flows exacerbate the deleterious effects of credit. However, surges in portfolio-equity flows seem to have an independent effect, even in the absence of a lending boom. Furthermore, emerging economies exhibit greater odds of crises after a windfall of capital.

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External Shocks and Banking Crises in Developing Countries: Does the Exchange Rate Regime Matter?

Cited by 32 publications

References 7 publications

COVID-19 and sustainable development goals (SDGs): An appraisal of the emanating effects in Nigeria

COVID-19 and sustainable development goals (SDGs): An appraisal of the emanating effects in Nigeria

Capital Inflow Surges in Emerging Economies: How Worried Should Latin America and the Caribbean Be?

Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises?: Cross-Country Evidence on Bonanzas in Capital Inflows and Bonanza-Boom-Bust Cycles

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