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Banking Sector Strenght and the Transmission of Currency Crises

Allard Bruinshoofd (), Bertrand Candelon () and Katharina Raabe

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: We show that, complementary to trade and financial linkages, the strength of the banking sector helps explain the transmission of currency crises. Specifically, we demonstrate that the Mexican, Thai, and Russian crises predominantly spread to countries with weaknesses in their banking sectors. At the same time, the role of banking sector strength varies per crisis; where the Mexican crisis spread to countries with a strong presence of foreign banks in domestic credit provision, the Thai crisis disproportionately contaminated countries where the banking sector was most sensitive to currency realignments, while the Russian crisis spread to countries with inefficiencies in the banking sector.

Keywords: Banking Sector Strength; Currency Crisis; Transmission Channels. (search for similar items in EconPapers)
JEL-codes: F30 F32 F34 (search for similar items in EconPapers)
Date: 2005-04
New Economics Papers: this item is included in nep-cwa, nep-mon and nep-sea
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Related works:
Working Paper: Banking sector strength and the transmission of currency crises (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:032

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