Lending of First versus Lending of Last Resort: The Bulgarian Financial Crisis of 1996/1997

Berlemann, Michael; Nenovsky, Nikolay

doi:10.1057/palgrave.ces.8100028

Cited by 52 publications

(20 citation statements)

References 44 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…While anecdotal evidence on this hypothesis is available for various countries (Hochreiter and Kowalski, ), the case of Bulgaria throughout the 1990s provides an excellent example for the differences between de‐jure‐rules and de facto behaviour. As described in Berlemann and Nenovsky () the Bulgarian National Bank contributed significantly to excessive inflation and the Bulgarian Financial Crisis of 1996/1997 by continuously monetizing public debt although formally being absolutely independent from the government. As a consequence, adequate measures of central bank independence should be based on informal rules and practices rather than solely on legal codes.…”

Section: Previous Empirical Evidencementioning

confidence: 98%

Effective Monetary Policy Conservatism: A Comparison of 13 OECD Countries

Berlemann

Hielscher

2013

Scottish J Political Eco

Self Cite

View full text Add to dashboard Cite

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 AbstractModern monetary economists argue that institutional aspects such as central bank independence and central bank conservatism play an important role for the performance of an economy. In order to be able to compare the effects of different institutions it is necessary to measure both central bank independence and conservatism. In this paper we propose a new methodology of uncovering the degree of effective monetary policy conservatism from observed central bank behavior. Employing a variant of the Barro-Gordonmodel we derive an optimal prime rate reaction function and show that more effectively conservative monetary policy tends to react less active to shocks to the real economy. In order to illustrate the proposed methodology we then estimate a common prime rate reaction function for a sample of 11 central banks in a panel setting and allow the reaction to real disturbances to differ between countries.JEL classification: E31; E58

show abstract

Section: Previous Empirical Evidencementioning

confidence: 98%

Effective Monetary Policy Conservatism: A Comparison of 13 OECD Countries

Berlemann

Hielscher

2013

Scottish J Political Eco

Self Cite

View full text Add to dashboard Cite

show abstract

“…As it is argued in Berlemann and Nenovsky (2003), the main reason for the moral hazard behaviour in Bulgaria was its history as a former communist country with a centrally-planned economy. The severity of Bulgaria's twin crisis was primarily, but not only, due to systematic moral hazard problems in the banking sector.…”

Section: The Bulgarian Crisis Of 1996/1997 and The Bulgarian Currencymentioning

confidence: 98%

“…Nevertheless, the government was not willing to close down these enterprises since this would have had caused excessive unemployment. 6 See Berlemann and Nenovsky (2003). Since most of these credits ex post turned out to be non-collectible, the banking system accumulated losses, too (Koford and 4 In this respect (restoring stability after crisis) some similarity can be down with gold standard restoration in European countries after the First World War (see for more details Bemholz (2003) and Moure, 1998).…”

Section: The Bulgarian Crisis Of 1996/1997 and The Bulgarian Currencymentioning

confidence: 99%

“…Under a new generation currency board an additional feature of a central bank is to serve as a lender of last resort (for a more detailed description see Berlemann and Nenovsky (2003)). BNB may extend loans in BGN to banks through the Banking Department (up to the level of central bank excess reserves) in the event of a liquidity risk affecting the stability of the banking system only to solvent banks experiencing an acute need of liquidity that cannot be provided from other sources.…”

Section: The Bulgarian Crisis Of 1996/1997 and The Bulgarian Currencymentioning

confidence: 99%

See 1 more Smart Citation

Sovereign Risk and Financial Crises

Scholtens¹,

Frenkel²,

Karmann³

2004

View full text Add to dashboard Cite

Softcover reprint of the hardcover 1st edition 2004The use of general descriptive names, registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. Hardcover-Design: Erich Kirchner, Heidelberg SPIN 11014980 42/3130/DK-5 4 3 2 1 0-Printed on acid-free paper Alexander Karmann and Dominik Maltritz come up with a structural model to . analyze sovereign risk. This approach is centered on what is actually taken as the value of the firm. Karmann and Maltritz opt for the discounted future net incomes which limits the sovereign's capacity to borrow from others. The sovereign's ability to pay consists of the amount of actual foreign exchange reserves and the po-Introduction IX and unobservable shifts in agents' beliefs as distinct causes of currency crises. His results suggest that significant parts of the Latin American crisis of 1994-95 and the Asian crisis of 1997-98 were indeed caused by contagion. Hence, the degree of real and financial interdependence with already affected countries is a good predictor of crises.Jiirgen von Hagen and Tai-kuang Ho examine the causal relationship between banking and currency crises during the 1980s and the 1990s. Using a sample of33 developing countries, they find that, in the 1980s, banking crises are more likely to lead than to follow currency crises. The opposite seems to be true for the 1990s. Within a multivariate probity approach the authors show that currency crises in the 1990s were strongly correlated with high ratios of M2 to foreign reserves and that banking crises in the 1990s were more intensely associated with a boom and bust cycle in credit growth.Ansgar Belke and Ralph Setzer look at the effects of excess exchange rate volatility on the real sector. Focusing on emerging markets, they construct a theoretical model of job creation and exchange rate uncertainty. On this basis, they present empirical results and discuss the costs of exchange rate volatility in Latin America and the CEECs. The authors emphasize that these costs do not imply a fixing exchange rate solution. This very much depends on the costs arising from fixed exchange rates in light of occurring volatility in fundamentals.Daniela Beckmann and Lukas Menckhoff discuss five new approaches of early warning systems (EWSs). They emphasize that the approaches suggested in the literature are based on very different frameworks that are partly not even close in terms of the definition of crises, data structure, and forecast horizons. A general problem of EWSs is their ex ante forecasting power. The authors see another problem in the implicit necessity to forecast exchange rates. Thus, they are skeptical about the ability of EWSs to forecast crises.The last two contributions are on policy lessons. Peter Tillmann analyzes the empirical effect of private sector involvement (PSI). According to the IMF understanding, the bail-in of international investors...

show abstract

“…More details about the crisis could be found in BNB annual reports(1996, 1997, 1998, 1999, 2000),OECD (1997OECD ( , 1999, Balyozov (1999),Enoch et al (2002) andBerlemann and Nenovsky (2003).…”

mentioning

confidence: 99%

Assessing Market Expectations on Exchange Rates and Inflation: A Pilot Forecasting System for Bulgaria

2005

Self Cite

View full text Add to dashboard Cite

Econometric forecasting models typically perform bad in volatile environments as they are often present in economies in transition. Since forecasts of key macroeconomic variable are inevitable as guidelines for economic policy, one might alternatively make attempts at measuring market participants' expectations or conduct surveys. However, often financial markets are underdeveloped and regular surveys are unavailable in transition countries. In this paper we propose to conduct experimental stock markets to reveal market participants' expectations. Wе present the results frоm a series of pilot markets conducted in Bulgaria throughout 2002 indicating that the method could be useful especially for transition countries.

show abstract

Lending of First versus Lending of Last Resort: The Bulgarian Financial Crisis of 1996/1997

Cited by 52 publications

References 44 publications

Effective Monetary Policy Conservatism: A Comparison of 13 OECD Countries

Effective Monetary Policy Conservatism: A Comparison of 13 OECD Countries

Sovereign Risk and Financial Crises

Assessing Market Expectations on Exchange Rates and Inflation: A Pilot Forecasting System for Bulgaria

Contact Info

Product

Resources

About