Banking crises in developing countries–What crucial role of exchange rate stability and external liabilities?

Brahim Gaies, Stéphane Goutte and Khaled Guesmi

Finance Research Letters, 2019, vol. 31, issue C

Abstract: We examine the determinants of banking crises occurrence in developing countries, focusing on the impact of the nature of external liabilities and exchange rate stability. For this purpose, we use a logit panel model, including 67 developing countries observed between 1972 and 2011, as well as a set of alternative estimation methods (logit fixed-effects and probit random-effects) and robustness tests. We find that FDI liabilities reduce the occurrence of banking crises, but debt liabilities increase them. In addition, banking crises occurrence decreases in developing countries with the stability of the exchange rate, real GDP growth, as well as better human capital quality and better political institutions.

Keywords: Financial crises; External liabilities; Exchange rate stability (search for similar items in EconPapers)
JEL-codes: F31 G01 G15 O24 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Banking Crises in Developing Countries-What Crucial Role of Exchange Rate Stability and External Liabilities? (2019)
Working Paper: Banking crises in developing countries–What crucial role of exchange rate stability and external liabilities? (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:31:y:2019:i:c:s1544612318305944

DOI: 10.1016/j.frl.2018.12.014

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