The twin crises: the causes of banking and balance-of-payments problems

Graciela Laura Kaminsky () and Carmen Reinhart ()

No 544, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In the wake of the ERM and Mexican currency crises, the subject of balance-of-payments crises has come to the forefront of academic and policy discussions. This paper focuses on the potential links between banking and balance-of-payments crises. We examine these episodes for a large number of countries and find that knowing that there are banking problems helps in predicting balance-of-payments crises, but the converse is not true; financial liberalization usually predates banking crises, indeed, it helps predict them. Rather than a causal relationship from banking to balance-of-payments crises, the macroeconomic "stylized facts" that characterize these episodes point to common causes.

Keywords: Balance of payments; Bank failures (search for similar items in EconPapers)
Date: 1996
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Related works:
Journal Article: The Twin Crises: The Causes of Banking and Balance-of-Payments Problems (1999)
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