Banking crises and crisis dating theory and evidence
Add a review and share your thoughts with other readers. Each bank chooses deposits, loans, and bond holdings b so as to maximize expected profits, given the choices of other banks. For all other explanatory variables, dating there is at least one specification that yields results different from all the others. An Empirical Investigation. Financial openness and exchange rate flexibility are captured by two previously unexploited measures of bank fragility.
While the richest income group loses ground, the lower half of the top decile appears to gain in relative terms. However, we have been able to essentially replicate their results using their identical specification and sample. Deposits, bank loans, and investment in bonds are determined for period t.
We show that partial tax coordination is more likely to prevail if the number of regions in a coalition subgroup is smaller and the number of existing regions in the entire economy is larger. This evidence supports some of the arguments made in the literature about the comparatively stronger resilience to external shocks of countries with more flexible exchange rate arrangements. It also allows you to accept potential citations to this item that we are uncertain about. Please enter recipient e-mail address es. Just as importantly, their definitions of what constitutes a banking crisis typically depend on government actions such as liquidity provision, bank resolution mechanisms, and so on.
CiteSeerX Banking crises and crisis dating Theory and evidence
Should governments and international institutions intervene? We show that when deposit insurance premia are low, the monetization of bank bailout costs may not be more inflationary than financing these costs out of general revenue. We also employed two different samples to account for differences in results due to either country or crisis coverage.
However, dating someone exclusively formatting rules can vary widely between applications and fields of interest or study. Excellent research assistance by Ioannis Tokatlidis is gratefully acknowledged. Here we consider four comprehensive classifications well known in the literature and widely used in empirical work. Please verify that you are not a robot.
For present purposes, modeling all this is a needless complication. All agents are risk-neutral, and time is discrete. Almost without exception, researchers obtain their information from government sources. In addition, we can construct better measures of some determinants of bank fragility such as bank market structure, since these variables can be constructed as time-series and not as period averages. Second, how to make a individual bank data and the almost universal coverage of banks allow us to conduct more powerful tests.
We document that credit booms start with an increase in productivity growth, which subsequently falls faster during bad booms. The deposit insurer bails out the banks when they fail. Advanced Search Find a Library. Such adverse shocks are for the most part unobservable, but their occurrence results in predictable changes in certain variables that are observable. Increasing the inflation tax rate obviously raises inflation, but so does an erosion of the inflation tax base.
The authors may be contacted at ademirguckunt worldbank. The increased decreased intensity of tax competition makes partial tax coordination more less sustainable. To be sure, this is an on-going debate and more work is needed. We employ the linear case so that there is no need to discuss a number of technical conditions.
Again, this topic is important and simply needs more research. Again, assessing whether these differences are due to sample composition or to other factors is worth investigating further but left for future research. With regard to deposit insurance, watch series dating the results with bank-level data are somewhat different than those obtained with the country sample.
This is because, while monetizing the costs increases the inflation tax rate, higher levels of general taxation reduce savings, deposits, bank reserves, and the inflation tax base. Thus, with the arguably better data, we find the opposite relationship as that reported by Beck et al. Aggregate bank profits are unavailable in this dataset. You already recently rated this item.
Our sample mean and median output loss estimates are also big. Depositors are paid pro-rata by the banks. Artem Golubev Aleksandr Rodionov. Allow this favorite library to be seen by others Keep this favorite library private.
The Turkish economy underwent important banking crises, particularly after s, like other developping countries. Second, excluding these observations requires taking a stand on the duration of a crisis. In light of the recent financial crisis, a debate on the potential value of limiting financial openness see e. Bordo, and as related to the specific mechanics of the shock triggering a crisis e. All our important findings hold qualitatively for both methods of dating banking crises.
Banking Crises and Crisis Dating Theory and Evidence
Still, when looking for intertemporal effects of quantitative easing programs, it appears that they are always welfare improving. We also show that under linear utility, partial tax coordination is more likely to prevail if the preference for a local public good is stronger. This suggests the potential value of extracting information from disaggregated data. While the use of country-level data is standard in the literature, employing individual bank data is novel.
We study a banking model in which banks invest in a riskless asset and compete in both deposit and risky loan markets. Banking systems heterogeneity and, specifically, the fact that bank systemic shock may affect banks differently, are taken into account. The fact that definitions and dating of Banking crises differ across studies, have been discussed before see cf. As dating the start is typically based on observing government actions it is difficult to precisely date crises, so we use a three year window.
However, they suggest that deposit insurance makes a government response to systemic bank shocks more likely, a finding that seems hardly remarkable. The specific requirements or preferences of your reviewing publisher, classroom teacher, institution or organization should be applied. Credit booms are not rare, some end in a crisis bad booms whereas others do not good booms. The E-mail Address es you entered is are not in a valid format.
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In chapter one, in the case of a closed economy, we find that quantitative easing decreases the magnitude of the crisis but increases its duration. All regressions include all available observations for each classification. First, the two events actually tend to occur on different dates. This paper addresses the problem of partial tax coordination among regional or national sovereign governments in a repeated game setting.
- The slope of this function is a random variable, to be described below, whose realization is observed at date t.
- The paper concludes by identifying directions for future research.
- We have selectively chosen a few studies, but the issues we raise would be relevant to much work besides these studies.
- To account for bank heterogeneity across countries, we estimate random coefficient Logit regressions.
- Sequence of events Suppose that in period t realized bank profits are non-negative.
- We outline research directions aimed at explaining why bank consolidation and conglomeration may not necessarily yield either safer financial firms or more resilient banking systems.
- Evidence from the recent crisis.
- Thus, the government seems more likely to intervene in a banking crisis when it is preceded by a currency crisis.
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- The explanatory variables that we study are ones that the existing literature has identified as important determinants of the probability that a country will experience a banking crisis.
Your request to send this item has been completed. There are two fundamental problems with that approach. Borrowers pay loans and in turn, banks pay depositors, if possible. The sample comprises all banks operating in each period, including those which exited either because they were absorbed by other banks or because they were closed. This finding conflicts with all results previously reported in the literature.
Banking Crises and Crisis Dating. (eBook )
This is denoted by avgherf, which is an inter-temporal average of the Hirschman-Herfindhal index for each country. First, for present purposes we use lagged values of all explanatory variables. Here, we have retained bank concentration and deposit insurance variables as controls. But, empirical results often diverge in important dimensions. Preview this item Preview this item.