Anatomy of international banking crises at the onset of the Great Recession

Mikhail Stolbov

MPRA Paper from University Library of Munich, Germany

Abstract: The paper examines a wide range of potential predictors of 25 international banking crises that broke out in 2007–2011 on the basis of cross–sectional logit models and the BCT (binary classification tree) algorithm, a novel technique in assessing the causes of banking crises. The major determinants of the crises arise from excessive credit depth (measured as private credit to GDP ratio) and illiquidity of the banking sector (credits to deposits ratio). The implementation of explicit deposit insurance schemes is also a pro–crisis factor due to the moral hazard effect they tend to cause. On the contrary, higher values of remittance inflows to GDP decrease the susceptibility to banking crises. These findings are robust under both methodologies. Lower bank concentration, bigger values of cost to income ratios as well as a higher level of economic liberalization make countries more vulnerable to banking crises, as derived from the logit analysis.

Keywords: banking crises; Great Recession; logit analysis; binary classification tree (search for similar items in EconPapers)
JEL-codes: E44 G21 (search for similar items in EconPapers)
Date: 2013-10-26
New Economics Papers: this item is included in nep-cba, nep-dcm, nep-hpe and nep-mac
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Related works:
Journal Article: Anatomy of international banking crises at the onset of the Great Recession (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:51236

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