EconPapers    
Economics at your fingertips  
 

Commodity Prices and Banking Crises

Markus Eberhardt () and Andrea Presbitero

No 15959, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Commodity prices are one of the most important drivers of output fluctuations in developing countries. We show that a major channel through which commodity price movements can affect the real economy is through their effect on banks' balance sheets and financial stability. Our analysis finds that the volatility of commodity prices is a significant predictor of banking crises in a sample of 60 low-income countries (LICs). In contrast to recent findings for advanced and emerging economies, credit booms and capital inflows do not play a significant role in predicting banking crises, consistent with a lack of de facto financial liberalization in LICs. We corroborate our main findings with historical data for 40 "peripheral" economies between 1848 and 1938. The effect of commodity price volatility on banking crises is concentrated in LICs with a fixed exchange rate regime and a high share of primary goods in production. We also find that commodity price volatility is likely to trigger financial instability through a reduction in government revenues and a shortening of sovereign debt maturity, which are likely to weaken banks' balance sheets.

Keywords: banking crises; commodity prices; Low income countries; volatility (search for similar items in EconPapers)
JEL-codes: F34 G01 Q02 (search for similar items in EconPapers)
Date: 2021-03
New Economics Papers: this item is included in nep-ban, nep-cba and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=15959 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Commodity prices and banking crises (2021) Downloads
Working Paper: Commodity prices and banking crises (2021) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:15959

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... rs/dp.php?dpno=15959

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2023-01-19
Handle: RePEc:cpr:ceprdp:15959