The Determinants of Banking Crises and Currency Crises

Young Mok Bae ()
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Young Mok Bae: Chungbuk National University

East Asian Economic Review, 2005, vol. 9, issue 1, 191-220

Abstract: This paper studies the factors associated with the emergence of banking crises and currency crises and the interrelationship between the two crises in 21 American, European and Asian countries in 1973~2000 using a multivariate logit econometric model. And this analysis attempts to introduce the lag model to solve the causality problems in banking crises and currency crises. In case of the simple binary models without lag, banking crises were associated with economic recession, inflation, depreciation, the rise of real interest rate, lending boom. But in case of lag models, banking crises were caused by economic recession, inflation, the rise of real interest rate, lending boom, the rise of reserve ratio, the liberalization of capital account. Currency crises were associated with economic recession, the larger deficit of current account relative to import in case of the simple binary models without lag, But in case of lag models, currency crises were caused by economic recession, the rapid decrease of net foreign assets of banks, and the larger deficit of current account relative to import. And this analysis shows that currency crises can be a cause of banking crises, not vice versa. Nevertheless the two types of crises have positive correlation with each other.

Keywords: Banking Crises; Currency Crises; Business Cycle; Lending Boom; Current Account; Capital Account Liberalization (search for similar items in EconPapers)
JEL-codes: F32 G01 G15 G21 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ris:eaerev:0186

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