EconPapers    
Economics at your fingertips  
 

Debt and Financial Crises

Wee Chian Koh (), Ayhan Kose, Peter S. Nagle (), Franziska Ohnsorge and Naotaka Sugawara ()
Additional contact information
Peter S. Nagle: World Bank
Naotaka Sugawara: World Bank

Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum

Abstract: Emerging market and developing economies have experienced recurrent episodes of rapid debt accumulation over the past fifty years. This paper examines the consequences of debt accumulation using a three-pronged approach: an event study of debt accumulation episodes in 100 emerging market and developing economies since 1970; a series of econometric models examining the linkages between debt and the probability of financial crises; and a set of case studies of rapid debt buildup that ended in crises. The paper reports four main results. First, episodes of debt accumulation are common, with more than 500 episodes occurring since 1970. Second, around half of these episodes were associated with financial crises which typically had worse economic outcomes than those without crises— after 8 years output per capita was typically 6-10 percent lower and investment 15-22 percent weaker in crisis episodes. Third, a rapid buildup of debt, whether public or private, increased the likelihood of a financial crisis, as did a larger share of short-term external debt, higher debt service, and lower reserves cover. Fourth, countries that experienced financial crises frequently employed combinations of unsustainable fiscal, monetary and financial sector policies, and often suffered from structural and institutional weaknesses.

Keywords: Financial crises; currency crises; debt crises; banking crises; public debt; private debt; external debt. (search for similar items in EconPapers)
JEL-codes: E32 E61 G01 H12 H61 H63 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2020-02
New Economics Papers: this item is included in nep-fdg, nep-his, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://eaf.ku.edu.tr/wp-content/uploads/2020/02/erf_wp_2001.pdf (application/pdf)

Related works:
Working Paper: Debt and Financial Crises (2020) Downloads
Working Paper: Debt and financial crises (2020) Downloads
Working Paper: Debt and Financial Crises (2020) 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:koc:wpaper:2001

Access Statistics for this paper

More papers in Koç University-TUSIAD Economic Research Forum Working Papers from Koc University-TUSIAD Economic Research Forum Contact information at EDIRC.
Bibliographic data for series maintained by Sumru Oz ().

 
Page updated 2021-05-04
Handle: RePEc:koc:wpaper:2001