Banking Crises and Contagion: Empirical Evidence
Eric Santor ()
Staff Working Papers from Bank of Canada
Recent events, such as the East Asian, Mexican, Scandinavian, and Argentinian crises, have sparked considerable interest in exploring how shocks experienced by one country can spread vis-à-vis real and nominal links to other countries' banking systems. Given the large costs associated with banking-system failures, both economists and policy-makers are interested in predicting the onset of banking crises and assessing the likelihood of contagion during crisis events. The author uses cross-country panel data to examine contagion across banking systems in developed and developing countries. Particular attention is paid to the construction of the cross-country sample: matching-method techniques are used to construct a suitable control-group sample analogue to the set of crisis countries to accurately quantify the probability of the occurrence of a banking crisis and the probability of banking-system contagion. The author finds that the sample choices of previous studies introduced bias into the estimates of the probability that a banking crisis would occur, owing to differences between the supports of the conditioning variables for the crisis and non-crisis country groups. Furthermore, the probability of a banking crisis increases when countries have macroeconomic characteristics similar to those that have recently experienced a crisis, regardless of the degree of actual economic linkages between the countries. This suggests that information contagion plays a larger role than previously suspected.
Keywords: International; topics (search for similar items in EconPapers)
JEL-codes: F30 G20 (search for similar items in EconPapers)
Pages: 61 pages
New Economics Papers: this item is included in nep-cfn and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:03-1
Access Statistics for this paper
More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().