Determinants of Banking System Fragility: A Case Study of Mexico

Brenda González-Hermosillo, Ceyla Pazarbaşioğlu and Robert Billings
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Brenda González-Hermosillo: International Monetary Fund
Ceyla PazarbaÅŸioÄŸlu: International Monetary Fund
Robert Billings: International Monetary Fund

IMF Staff Papers, 1997, vol. 44, issue 3, 295-314

Abstract: This paper tests empirically the proposition that bank fragility is determined by bank-specific factors, macroeconomic conditions, and potential contagion effects. The methodology allows the variables that determine bank failure to differ from those that influence banks' time to failure (or survival rate). Based on the indicators of fragility of individual banks, we construct an index of fragility for the banking system. The framework is applied to the Mexican financial crisis that began in 1994. For Mexico, bank-specific variables and contagion effects explain the likelihood, whereas macroeconomic variables largely determine the timing, of bank failure.

JEL-codes: C41 E44 G21 (search for similar items in EconPapers)
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:pal:imfstp:v:44:y:1997:i:3:p:295-314

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