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Stability periods between financial crises: The role of macroeconomic fundamentals and crises management policies

Zorobabel Bicaba (), Daniel Kapp and Francesco Molteni ()

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The aim of this paper is to identify which factors explain why some countries are more prone to enjoy long durations of stability, while others experience crises in shorter intervals. To this end, we analyze the duration of stability periods between currency, debt, and banking crises from 1980 to 2008. We find that durations of tranquility between currency and debt crises are bimodally distributed, making conventional econometric models unsuitable. Therefore, we introduce an innovative econometric strategy, the Finite Mixture Model. Real and financial variables are found to have high predictive power for the spell of stability between currency crises, while for debt crises, the real interest rate is observed to be the best predictor. The time between the occurrence of systemic financial crises is prolonged through large-scale government interventions and IMF aid programs, while recapitalization turns out to have a negative impact

Keywords: Financial crises; finite mixture model; duration; bimodality (search for similar items in EconPapers)
JEL-codes: C14 C16 C41 G01 G18 H12 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2011-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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ftp://mse.univ-paris1.fr/pub/mse/CES2011/11064.pdf (application/pdf)

Related works:
Journal Article: Stability periods between financial crises: The role of macroeconomic fundamentals and crises management policies (2014) Downloads
Working Paper: Stability periods between financial crises: The role of macroeconomic fundamentals and crises management policies (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:11064

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