This document summarizes a research paper that studies the effects of financial structure and financial development on banking fragility using panel data regression analysis. The study finds that banking stability is enhanced in market-based financial systems, but that financial development can reduce stability. However, the fragility-enhancing effect of financial development can only be seen when accounting for financial structure. Thus, the research concludes that financial structure and development jointly influence banking fragility. The document provides context on the motivation and methodology of the research paper.
This document summarizes a study that estimates a dynamic stochastic general equilibrium (DSGE) model to quantify the role of financial frictions, known as the financial accelerator mechanism, in U.S. business cycle fluctuations from 1973 to 2008. The model incorporates a high-information content credit spread index to identify the financial accelerator parameters and measure the impact of financial shocks on the real economy. Estimation results identify an operative financial accelerator, where increases in external financing costs significantly reduce investment and output. Financial disturbances accounted for significant portions of investment and output declines during economic downturns, particularly in the 1970s.
This document discusses issues with using econometric models for macro stress testing of credit portfolios. Specifically:
- Econometric models have limitations like insufficient data, unstable relationships between credit risk and macroeconomic variables, and inability to capture non-linear behavior in stressed conditions.
- An analysis of Hong Kong data from 1997-2007 illustrates these limitations, as default rates did not consistently correlate with macroeconomic factors during stressed periods.
- The document proposes a simple methodology for bank supervisors to estimate history-based stressed PDs for individual banks, using the highest observed default rate for the banking sector as a whole as a benchmark. This allows supervisors to validate banks' self-reported stressed PD estimates.
Non-monetary effects Employee performance during Financial Crises in the Kurd...AI Publications
This document summarizes a research paper on non-monetary factors affecting employee performance during financial crises in the Kurdistan region of Iraq. The researcher developed five hypotheses to test how factors like job security, training, compensation, job enrichment, and leadership style influence employee performance during crises. Simple regression analysis found that job security had the strongest positive association with performance. The document provides context on the 2014-2018 financial crisis in Iraq and reviews literature on defining and analyzing different types of financial crises, including banking crises.
The relationship between net interest margin and return on assets of listed b...Alexander Decker
This study examined the relationship between net interest margin (NIM) and return on assets (ROA) of listed banks in Ghana from 2005-2011. It found a strong positive correlation between NIM and ROA, with NIM explaining 82.6% of the variation in ROA. Both NIM and ROA generally decreased over the period, though they increased between 2009-2010. The study also found a very strong positive relationship between net interest income and profit before tax, with net interest income explaining 99.8% of the variation in profit before tax. In conclusion, the ability of banks to generate net interest income was highly influential in determining their level of profitability.
Ivo Pezzuto - Predictable and Avoidable: What's Next?Dr. Ivo Pezzuto
Abstract:
The author of this paper (Dr. Ivo Pezzuto) has been one of the first authors to write back in 2008 about the alleged "subprime mortgage loans fraud" which has triggered the 2008 financial crisis, in combination with multiple other complex, highly interrelated, and concurrent factors.
The author has been also one of the first authors to report in that same working paper of 2008 (available on SSRN and titled "Miraculous Financial Engineering or Toxic Finance? The Genesis of the U.S. Subprime Mortgage Loans Crisis and its Consequences on the Global Financial Markets and Real Economy") the high probability of a Eurozone debt crisis, due to a number of unsolved structural macroeconomic problems, the lack of a single crisis resolution scheme, current account imbalances, and in some countries, housing bubbles/high private debt.
In the book published in 2013 and titled "Predictable and Avoidable: Repairing Economic Dislocation and Preventing the Recurrence of Crisis", Dr. Ivo Pezzuto has exposed the root causes of the financial crisis in order to enables readers to understand that the crisis we have seen was predictable and should have been avoidable, and that a recurrence can be avoided, if lessons are learned and the right action taken.
Almost one year after the publication of the book "Predictable and Avoidable: Repairing Economic Dislocation and Preventing the Recurrence of Crisis", the author has decided to write this working paper to explore what happened in the meantime to the financial markets and to the financial regulation implementation.
Most of all, the author with this working paper aims to provide an updated analysis as strategist and scenario analyst on the topics addressed in the book "Predictable and Avoidable" based on a forward-looking perspective and on potential "tail risk" scenarios. The topics reported in this paper relate to financial crises; Government policy; financial regulation; corporate governance; credit risk management; financial risk management; economic policy; Euro Zone debt crisis; the "Great Recession"; business ethics; sociology, finance and financial markets.
This working paper aims to contribute to the debate about the change needed in the banking and finance industries and to supervisory frameworks, in order to enhance regulatory mechanisms and to improve global financial stability and sustainability.
Conclusion: This paper aims to demonstrate that, in spite of the artificially reduced volatility in the markets, systemic risks have not been reduced after the global financial crisis and that, currently (September 2014), adverse scenarios seem to be much more likely than previously expected by regulators and supervisory authorities, due to the prolonged massive accommodative monetary policies, the increased economic and geo-political risks, and some incomplete or unfit financial regulation. Thus, the stress testing models, their underlying assumptions, and the supervisory aut
Foundations of Financial Sector Mechanisms and Economic Growth in Emerging Ec...iosrjce
In this paper, we try to uncover the economic foundations of financial sector development and its
impacts on accelerating economic growth in the given context of emerging economies. We theorize and
empirically test a causally-motivated relationship among economic growth and related key financial sector
variables pertinent to this problem. We accomplish this by analyzing a 20 year panel-data constructed for 30
countries falling within the categorization of an ‘emerging economy’. We estimate the appropriate statistical
models along with related diagnostic tests. Finally, we comment on the strengths and weaknesses of our
approach and we try to explicate the economic rationale and justification for our formulation and the evidences
that follow
The document discusses two quantitative models - the Household Risk Assessment Model (HRAM) and the Macro Financial Risk Assessment Framework (MFRAF) - that the Bank of Canada has developed to better identify and measure systemic financial risks, with HRAM focusing on risks from elevated household debt and MFRAF analyzing contagion effects between banks. It also notes the challenges in modeling systemic risk and the need to continue improving these quantitative tools.
Mefmi presentation on Macroprudental supervision and financial stability asse...Tinashe Bvirindi
This document discusses developing a framework for macroprudential policy in MEFMI member countries. It begins by outlining challenges to effective macroprudential policy implementation, such as a lack of consensus on defining financial stability. It then reviews current regional practices in selected countries. The objectives of the study are described as exploring the relationship between the financial system and macroeconomy, measuring systemic risks, and measuring feedback effects. A dynamic stochastic general equilibrium model is proposed for the analysis, along with acknowledgement of some weaknesses of the model.
This document summarizes a study that estimates a dynamic stochastic general equilibrium (DSGE) model to quantify the role of financial frictions, known as the financial accelerator mechanism, in U.S. business cycle fluctuations from 1973 to 2008. The model incorporates a high-information content credit spread index to identify the financial accelerator parameters and measure the impact of financial shocks on the real economy. Estimation results identify an operative financial accelerator, where increases in external financing costs significantly reduce investment and output. Financial disturbances accounted for significant portions of investment and output declines during economic downturns, particularly in the 1970s.
This document discusses issues with using econometric models for macro stress testing of credit portfolios. Specifically:
- Econometric models have limitations like insufficient data, unstable relationships between credit risk and macroeconomic variables, and inability to capture non-linear behavior in stressed conditions.
- An analysis of Hong Kong data from 1997-2007 illustrates these limitations, as default rates did not consistently correlate with macroeconomic factors during stressed periods.
- The document proposes a simple methodology for bank supervisors to estimate history-based stressed PDs for individual banks, using the highest observed default rate for the banking sector as a whole as a benchmark. This allows supervisors to validate banks' self-reported stressed PD estimates.
Non-monetary effects Employee performance during Financial Crises in the Kurd...AI Publications
This document summarizes a research paper on non-monetary factors affecting employee performance during financial crises in the Kurdistan region of Iraq. The researcher developed five hypotheses to test how factors like job security, training, compensation, job enrichment, and leadership style influence employee performance during crises. Simple regression analysis found that job security had the strongest positive association with performance. The document provides context on the 2014-2018 financial crisis in Iraq and reviews literature on defining and analyzing different types of financial crises, including banking crises.
The relationship between net interest margin and return on assets of listed b...Alexander Decker
This study examined the relationship between net interest margin (NIM) and return on assets (ROA) of listed banks in Ghana from 2005-2011. It found a strong positive correlation between NIM and ROA, with NIM explaining 82.6% of the variation in ROA. Both NIM and ROA generally decreased over the period, though they increased between 2009-2010. The study also found a very strong positive relationship between net interest income and profit before tax, with net interest income explaining 99.8% of the variation in profit before tax. In conclusion, the ability of banks to generate net interest income was highly influential in determining their level of profitability.
Ivo Pezzuto - Predictable and Avoidable: What's Next?Dr. Ivo Pezzuto
Abstract:
The author of this paper (Dr. Ivo Pezzuto) has been one of the first authors to write back in 2008 about the alleged "subprime mortgage loans fraud" which has triggered the 2008 financial crisis, in combination with multiple other complex, highly interrelated, and concurrent factors.
The author has been also one of the first authors to report in that same working paper of 2008 (available on SSRN and titled "Miraculous Financial Engineering or Toxic Finance? The Genesis of the U.S. Subprime Mortgage Loans Crisis and its Consequences on the Global Financial Markets and Real Economy") the high probability of a Eurozone debt crisis, due to a number of unsolved structural macroeconomic problems, the lack of a single crisis resolution scheme, current account imbalances, and in some countries, housing bubbles/high private debt.
In the book published in 2013 and titled "Predictable and Avoidable: Repairing Economic Dislocation and Preventing the Recurrence of Crisis", Dr. Ivo Pezzuto has exposed the root causes of the financial crisis in order to enables readers to understand that the crisis we have seen was predictable and should have been avoidable, and that a recurrence can be avoided, if lessons are learned and the right action taken.
Almost one year after the publication of the book "Predictable and Avoidable: Repairing Economic Dislocation and Preventing the Recurrence of Crisis", the author has decided to write this working paper to explore what happened in the meantime to the financial markets and to the financial regulation implementation.
Most of all, the author with this working paper aims to provide an updated analysis as strategist and scenario analyst on the topics addressed in the book "Predictable and Avoidable" based on a forward-looking perspective and on potential "tail risk" scenarios. The topics reported in this paper relate to financial crises; Government policy; financial regulation; corporate governance; credit risk management; financial risk management; economic policy; Euro Zone debt crisis; the "Great Recession"; business ethics; sociology, finance and financial markets.
This working paper aims to contribute to the debate about the change needed in the banking and finance industries and to supervisory frameworks, in order to enhance regulatory mechanisms and to improve global financial stability and sustainability.
Conclusion: This paper aims to demonstrate that, in spite of the artificially reduced volatility in the markets, systemic risks have not been reduced after the global financial crisis and that, currently (September 2014), adverse scenarios seem to be much more likely than previously expected by regulators and supervisory authorities, due to the prolonged massive accommodative monetary policies, the increased economic and geo-political risks, and some incomplete or unfit financial regulation. Thus, the stress testing models, their underlying assumptions, and the supervisory aut
Foundations of Financial Sector Mechanisms and Economic Growth in Emerging Ec...iosrjce
In this paper, we try to uncover the economic foundations of financial sector development and its
impacts on accelerating economic growth in the given context of emerging economies. We theorize and
empirically test a causally-motivated relationship among economic growth and related key financial sector
variables pertinent to this problem. We accomplish this by analyzing a 20 year panel-data constructed for 30
countries falling within the categorization of an ‘emerging economy’. We estimate the appropriate statistical
models along with related diagnostic tests. Finally, we comment on the strengths and weaknesses of our
approach and we try to explicate the economic rationale and justification for our formulation and the evidences
that follow
The document discusses two quantitative models - the Household Risk Assessment Model (HRAM) and the Macro Financial Risk Assessment Framework (MFRAF) - that the Bank of Canada has developed to better identify and measure systemic financial risks, with HRAM focusing on risks from elevated household debt and MFRAF analyzing contagion effects between banks. It also notes the challenges in modeling systemic risk and the need to continue improving these quantitative tools.
Mefmi presentation on Macroprudental supervision and financial stability asse...Tinashe Bvirindi
This document discusses developing a framework for macroprudential policy in MEFMI member countries. It begins by outlining challenges to effective macroprudential policy implementation, such as a lack of consensus on defining financial stability. It then reviews current regional practices in selected countries. The objectives of the study are described as exploring the relationship between the financial system and macroeconomy, measuring systemic risks, and measuring feedback effects. A dynamic stochastic general equilibrium model is proposed for the analysis, along with acknowledgement of some weaknesses of the model.
This document is a dissertation submitted by Martin Reilly in partial fulfillment of an MFin degree in international finance. The dissertation examines the impact of quantitative easing announcements by the US Federal Reserve on equity prices in the US. Specifically, it analyzes the stock price movements of 100 equities and three major indices in response to 7 announcements regarding the Federal Reserve's QE3 program between 2008-2014. The dissertation reviews previous literature on the topics of policy-rate guidance, interest rate effects, and large-scale asset purchase programs. It then outlines the methodology used, presents results showing the statistical significance of stock price movements on announcement days, and concludes that QE announcements had a measurable impact on equity prices.
This document discusses the origins and consequences of the 2007-2008 global financial crisis. It began in the US housing market with a rise in subprime mortgage defaults. Loose monetary policy and financial innovation like securitization contributed to overextension of credit. When housing prices declined and interest rates rose, many loans defaulted. This caused losses for financial institutions and a loss of confidence in the market. Major banks like Lehman Brothers collapsed, deepening the crisis. The consequences included a global recession, tightening financial regulation, and lessons about risks in the banking system like credit, market and liquidity risk.
The document summarizes some of the key risks facing the international banking system. It discusses how sovereign debt crises are destabilizing markets and economic growth is sluggish in developed nations. Banks face challenges including high credit risks in Europe, regulatory changes, and demanding customers. The main risks identified include default risk if borrowers fail to repay, financial risk from capital structure and debt levels, and business risk from uncertainty in markets and income.
Informative content of macroeconomic fundamentals with respect to currency crisis prediction is reassessed for the period of 1990s on the panel of 46 developed and emerging economies.
In the first part the paper develops a model for currency crisis prediction. The distinction is made between variables emphasized by 'first generation' and 'second generation' models. Special attention is directed towards multiple equilibria and contagion phenomena. Considerable amount of predictability is found, particularly on behalf of standard leading crisis indicators, such as overvaluation of the real exchange rate and the level of foreign exchange reserves. Multiple equilibria don't get much support from the data while contagion effect is obviously working – apparently through various channels.
In the second part the relationship between model specification and the significance of coefficients is investigated in the attempt to ultimately evaluate what can be expected from empirical implementation of crisis prediction. An average predictive power of such models and employed variables is assessed.
Authored by: Marcin Sasin
Published in 2001
Cross country empirical studies of banking crisisAlexander Decker
1) The document analyzes factors associated with banking crises during periods of financial liberalization using a spatial Durbin model with panel data from 49 countries from 1989-1997.
2) The results suggest that financial liberalization increased the likelihood of banking crises, especially in emerging markets. Tighter restrictions on bank activities and entry also increased fragility.
3) Stronger institutions partly mitigated the effects of financial liberalization on crises. The impact of determinants differed between the full sample and emerging economies.
This thesis examines how policymakers should respond during times of financial sector distress. It outlines that policymakers face two critical tasks: 1) identifying and addressing the issues critical to the crisis, and 2) ensuring the financial sector reaches a new equilibrium. The importance and nature of these tasks will be illustrated using evidence from the Asian Financial Crisis and the U.S. Savings and Loans Crisis. Frameworks will also be proposed to guide policymakers in accomplishing each task.
The aim of this paper is to analyze the liquidity levels of various banks in the UAE for the period 2005-2009. To understand the behavior of liquidity indicators especially during the financial crisis, the researcher will analyze the four liquidity indicators over the years 2005 to 2009. The findings highlight how the banks in question have been impacted by the 2007-2008 crisis. This can most obviously be seen in the notable decline of each of the banks liquidity level in 2009. The effect of loans to total assets, loans to customers’ deposit, and investment to total assets ratios for the five banks was most notable in 2009. Two liquidity ratios were analyzed in order to determine the banks’ ability to honor its debt obligations, these being loans to total assets and loans to customers respectively. The third ratio was the total equity to total assets to assess the liquidity level in the capital structure, while the fourth ratio was the investment to total assets to measure the managing of liquidity. While Bank liquidity was affected by the crisis, bank performance remained relatively stable, as measured by coefficient of variation, since these banks were able to yield more control over cash flows in comparison to revenues and costs.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
This document summarizes a paper that analyzes whether central banks should modify their interest rate policy rules (like the Taylor rule) to account for credit spreads or credit volumes. The paper uses a New Keynesian economic model modified to include financial frictions like heterogeneous households and credit markets. It finds that adjusting the policy rate in response to changes in credit spreads or volumes can improve outcomes in response to financial disturbances, but such adjustments may not help or could hurt in response to other disturbance types. The paper concludes by discussing the model and outlining the analysis that will be conducted using the model to evaluate modified policy rules.
Mosaic Financial Conditions Index is an effective asset allocation tool, based on the credit markets as a leading indicator for both economy and risk assets.
The paper presents three generations of theoretical models of currency crises. The models were drawing on the real crises. The first-generation models were developed after balance-of-payment crises in Mexico (1973-82), Argentina (1978-81), and Chile (1983). The second-generation models arose after speculative attacks in Europe and Mexico in 1990s. Finally, first attempts to built the third-generation models started after the Asian crisis in 1997-98. The paper also explains the mechanism of currency crisis, provides an overview of the crises literature, and defines the types of crises. This work is intended to summarize the current level of knowledge on the theoretical aspects of currency crises.
Authored by: Rafal Antczak
Published in 2000
A minimal moral hazard central stabilization capacity for the EMU based on wo...ADEMU_Project
This document proposes an "export-based stabilisation capacity" (ESC) for the Eurozone that allows for cross-border transfers in response to changes in world trade across different sectors. The ESC would provide transfers from countries less affected by a decline in world trade in a given sector to countries more dependent on that sector. This is intended to cushion economic shocks while avoiding moral hazard concerns since the transfers are based on exogenous world trade factors. A simulation using historical export data finds the transfers would be countercyclical and stabilize over time, suggesting the risk of permanent transfers is low. However, timely availability of sectoral trade data could pose practical challenges to implementation.
This document summarizes a study that examines the impact of financial liberalization on money demand in the Central African Economic and Monetary Community (CEMAC) using generalized method of moments estimations. The study aims to assess the effect of interest rates and bank credit to the private sector on money demand. It reviews theories on the relationship between financial liberalization and money demand and related empirical literature. The empirical analysis uses a money demand function and panel data to determine whether financial liberalization has negatively impacted money demand in CEMAC through changes in interest rates and bank credit levels.
This paper focuses on the measurement of a contemporaneous currency crisis. The analysis covers 14 "emerging" or "transforming" economies that experienced episodes of currency crises over the last decade. It adds to well-known examples relatively littleknown evidence on the crisis depth in some of the CIS countries. Following the Eichengreen, Rose, and Wyplosz (1994) definition of a currency crisis, the emphasis is primarily put on the examination of changes in relative reserves, exchange rates, and real interest rates during periods of exchange rate pressure. Other measures of the depth of a currency crisis as well as measures of external vulnerability are also discussed. The findings support the adequacy of the Eichengreen, Rose, and Wyplosz (1994) definition in analyzing crisis developments in emerging economies.
Authored by: Malgorzata Jakubiak
Published in 2000
The Role of Banks in the Propagation of External Shocks to African Economiespaperpublications3
Abstract: The paper examines the role played by banks in the propagation of external shocks to African economies. We employ a general equilibrium model of a small open economy to analyse how the banking sector propagates external shocks. The study uses a vector autoregression (VAR) analysis to assess the impact of exchange rate and foreign interest rate shocks on bank lending spreads and output fluctuations in African economies. We use quarterly time-series data for 5 selected African countries for the period 1990-2011. The findings show that foreign interest rate and exchange rate shocks significantly affect output fluctuations in Africa. The results, however, indicate that banks play limited role in the propagation of shocks to African economies.
Proposed topic of the res an emperical analysis on interest rate risk managem...tesfatsion tefera
Risk is defined as anything that can create hindrances in the way of achievement of certain objectives. It can be because of either internal factors or external factors, depending upon the type of risk that exists within a particular situation. Exposure to that risk can make a situation more critical. A better way to deal with such a situation; is to take certain proactive measures to identify any kind of risk that can result in undesirable outcomes. In simple terms, it can be said that managing a risk in advance is far better than waiting for its occurrence. Risk Management is a measure that is used for identifying, analyzing and then responding to a particular risk. It is a process that is continuous in nature and a helpful tool in decision making process. According to the Higher Education Funding Council for England (HEFCE), Risk Management is not just used for ensuring the reduction of the probability of bad happenings but it also covers the increase in likeliness of occurring good things. A model called “Prospect Theory” states that a person is more likely to take on the risk than to suffer a sure loss.
This document presents a methodology for evaluating qualitative forecasts made in the minutes of Federal Open Market Committee (FOMC) meetings from 2006 to 2010. The author aims to assess how the FOMC viewed the Great Recession as it was occurring. A quantitative index will be created from the qualitative statements in the minutes and supplemented with a textual analysis to determine what information the FOMC considered. The methodology makes contributions by providing a consistent way to evaluate qualitative statements and determine the information used to generate the forecasts.
Financial crises have become relatively frequent events since the beginning of the 1980s. They have taken three main forms: currency crises, banking crises, or both - so called twin
crises. As the number of developed economies, developing countries, and economies in transition experienced severe financial crashes researchers are trying to propose a framework for systemic analyses. That is why attempts to advance the understanding of features leading to the outbreak of financial crisis as well as the reasons of vulnerability have become more and more important. In recent years a number of efforts have been undertaken to identify variables that act as early warning signals for crises. The purpose of this paper is to provide some perspective on the issue of early warning signals of vulnerability to currency crises. In particular, it is aimed at presenting and highlighting the main findings of theoretical literature in this area.
Authored by: Magdalena Tomczynska
Published in 2000
Measuring the Dynamics of Financial Deepening and Economic Growth in Nigeria,...iosrjce
The study examined the relationship between financial deepening and economic growth for the
period 1981 to 2013 using empirical evidence from Nigeria. The Engel-Granger two-step cointegration
procedures and Error Correction Model (ECM) were used as the method of estimation. The analyses of
residuals of the OLS regression showed evidence in favour of cointegration between financial deepening and
economic growth. Similarly, estimates from the error correction model provide evidence to show that financial
deepening indicators and GDP series converge to a long-run equilibrium at a reasonably fast rate. The result
points to the fact that the deepening of the financial system can engineer the Nigerian economy to greater
growth.
This document provides an overview of several international financial markets including: the foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market, and international stock markets. It describes the motives and reasons for corporations and investors to use these international markets such as taking advantage of interest rate differences, currency fluctuations, and diversification benefits. The key international financial markets facilitate international trade, investment and borrowing activities.
The document classifies different market structures based on factors like competition, time period, and place. It describes perfect competition as a theoretical market with many small sellers and buyers, homogeneous products, and perfect information. Characteristics include profit maximization and no barriers to entry or exit. Imperfect competition includes monopoly, oligopoly and monopolistic competition where some characteristics of perfect competition are relaxed. Oligopoly describes a market with few dominant firms producing similar or differentiated products where they are interdependent and can influence prices.
The document describes the structure of the Indian financial market. It discusses various segments including the debt market, money market, capital market, and equity market. The money market deals in short term instruments like treasury bills, commercial bills, certificates of deposit, and commercial paper. It functions to reduce transaction costs, provide liquidity, facilitate price discovery, and mobilize savings. The capital market raises long term funds through stock and bond markets. It helps with capital formation, investment opportunities, and economic growth.
This document is a dissertation submitted by Martin Reilly in partial fulfillment of an MFin degree in international finance. The dissertation examines the impact of quantitative easing announcements by the US Federal Reserve on equity prices in the US. Specifically, it analyzes the stock price movements of 100 equities and three major indices in response to 7 announcements regarding the Federal Reserve's QE3 program between 2008-2014. The dissertation reviews previous literature on the topics of policy-rate guidance, interest rate effects, and large-scale asset purchase programs. It then outlines the methodology used, presents results showing the statistical significance of stock price movements on announcement days, and concludes that QE announcements had a measurable impact on equity prices.
This document discusses the origins and consequences of the 2007-2008 global financial crisis. It began in the US housing market with a rise in subprime mortgage defaults. Loose monetary policy and financial innovation like securitization contributed to overextension of credit. When housing prices declined and interest rates rose, many loans defaulted. This caused losses for financial institutions and a loss of confidence in the market. Major banks like Lehman Brothers collapsed, deepening the crisis. The consequences included a global recession, tightening financial regulation, and lessons about risks in the banking system like credit, market and liquidity risk.
The document summarizes some of the key risks facing the international banking system. It discusses how sovereign debt crises are destabilizing markets and economic growth is sluggish in developed nations. Banks face challenges including high credit risks in Europe, regulatory changes, and demanding customers. The main risks identified include default risk if borrowers fail to repay, financial risk from capital structure and debt levels, and business risk from uncertainty in markets and income.
Informative content of macroeconomic fundamentals with respect to currency crisis prediction is reassessed for the period of 1990s on the panel of 46 developed and emerging economies.
In the first part the paper develops a model for currency crisis prediction. The distinction is made between variables emphasized by 'first generation' and 'second generation' models. Special attention is directed towards multiple equilibria and contagion phenomena. Considerable amount of predictability is found, particularly on behalf of standard leading crisis indicators, such as overvaluation of the real exchange rate and the level of foreign exchange reserves. Multiple equilibria don't get much support from the data while contagion effect is obviously working – apparently through various channels.
In the second part the relationship between model specification and the significance of coefficients is investigated in the attempt to ultimately evaluate what can be expected from empirical implementation of crisis prediction. An average predictive power of such models and employed variables is assessed.
Authored by: Marcin Sasin
Published in 2001
Cross country empirical studies of banking crisisAlexander Decker
1) The document analyzes factors associated with banking crises during periods of financial liberalization using a spatial Durbin model with panel data from 49 countries from 1989-1997.
2) The results suggest that financial liberalization increased the likelihood of banking crises, especially in emerging markets. Tighter restrictions on bank activities and entry also increased fragility.
3) Stronger institutions partly mitigated the effects of financial liberalization on crises. The impact of determinants differed between the full sample and emerging economies.
This thesis examines how policymakers should respond during times of financial sector distress. It outlines that policymakers face two critical tasks: 1) identifying and addressing the issues critical to the crisis, and 2) ensuring the financial sector reaches a new equilibrium. The importance and nature of these tasks will be illustrated using evidence from the Asian Financial Crisis and the U.S. Savings and Loans Crisis. Frameworks will also be proposed to guide policymakers in accomplishing each task.
The aim of this paper is to analyze the liquidity levels of various banks in the UAE for the period 2005-2009. To understand the behavior of liquidity indicators especially during the financial crisis, the researcher will analyze the four liquidity indicators over the years 2005 to 2009. The findings highlight how the banks in question have been impacted by the 2007-2008 crisis. This can most obviously be seen in the notable decline of each of the banks liquidity level in 2009. The effect of loans to total assets, loans to customers’ deposit, and investment to total assets ratios for the five banks was most notable in 2009. Two liquidity ratios were analyzed in order to determine the banks’ ability to honor its debt obligations, these being loans to total assets and loans to customers respectively. The third ratio was the total equity to total assets to assess the liquidity level in the capital structure, while the fourth ratio was the investment to total assets to measure the managing of liquidity. While Bank liquidity was affected by the crisis, bank performance remained relatively stable, as measured by coefficient of variation, since these banks were able to yield more control over cash flows in comparison to revenues and costs.
International Journal of Business and Management Invention (IJBMI)inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
This document summarizes a paper that analyzes whether central banks should modify their interest rate policy rules (like the Taylor rule) to account for credit spreads or credit volumes. The paper uses a New Keynesian economic model modified to include financial frictions like heterogeneous households and credit markets. It finds that adjusting the policy rate in response to changes in credit spreads or volumes can improve outcomes in response to financial disturbances, but such adjustments may not help or could hurt in response to other disturbance types. The paper concludes by discussing the model and outlining the analysis that will be conducted using the model to evaluate modified policy rules.
Mosaic Financial Conditions Index is an effective asset allocation tool, based on the credit markets as a leading indicator for both economy and risk assets.
The paper presents three generations of theoretical models of currency crises. The models were drawing on the real crises. The first-generation models were developed after balance-of-payment crises in Mexico (1973-82), Argentina (1978-81), and Chile (1983). The second-generation models arose after speculative attacks in Europe and Mexico in 1990s. Finally, first attempts to built the third-generation models started after the Asian crisis in 1997-98. The paper also explains the mechanism of currency crisis, provides an overview of the crises literature, and defines the types of crises. This work is intended to summarize the current level of knowledge on the theoretical aspects of currency crises.
Authored by: Rafal Antczak
Published in 2000
A minimal moral hazard central stabilization capacity for the EMU based on wo...ADEMU_Project
This document proposes an "export-based stabilisation capacity" (ESC) for the Eurozone that allows for cross-border transfers in response to changes in world trade across different sectors. The ESC would provide transfers from countries less affected by a decline in world trade in a given sector to countries more dependent on that sector. This is intended to cushion economic shocks while avoiding moral hazard concerns since the transfers are based on exogenous world trade factors. A simulation using historical export data finds the transfers would be countercyclical and stabilize over time, suggesting the risk of permanent transfers is low. However, timely availability of sectoral trade data could pose practical challenges to implementation.
This document summarizes a study that examines the impact of financial liberalization on money demand in the Central African Economic and Monetary Community (CEMAC) using generalized method of moments estimations. The study aims to assess the effect of interest rates and bank credit to the private sector on money demand. It reviews theories on the relationship between financial liberalization and money demand and related empirical literature. The empirical analysis uses a money demand function and panel data to determine whether financial liberalization has negatively impacted money demand in CEMAC through changes in interest rates and bank credit levels.
This paper focuses on the measurement of a contemporaneous currency crisis. The analysis covers 14 "emerging" or "transforming" economies that experienced episodes of currency crises over the last decade. It adds to well-known examples relatively littleknown evidence on the crisis depth in some of the CIS countries. Following the Eichengreen, Rose, and Wyplosz (1994) definition of a currency crisis, the emphasis is primarily put on the examination of changes in relative reserves, exchange rates, and real interest rates during periods of exchange rate pressure. Other measures of the depth of a currency crisis as well as measures of external vulnerability are also discussed. The findings support the adequacy of the Eichengreen, Rose, and Wyplosz (1994) definition in analyzing crisis developments in emerging economies.
Authored by: Malgorzata Jakubiak
Published in 2000
The Role of Banks in the Propagation of External Shocks to African Economiespaperpublications3
Abstract: The paper examines the role played by banks in the propagation of external shocks to African economies. We employ a general equilibrium model of a small open economy to analyse how the banking sector propagates external shocks. The study uses a vector autoregression (VAR) analysis to assess the impact of exchange rate and foreign interest rate shocks on bank lending spreads and output fluctuations in African economies. We use quarterly time-series data for 5 selected African countries for the period 1990-2011. The findings show that foreign interest rate and exchange rate shocks significantly affect output fluctuations in Africa. The results, however, indicate that banks play limited role in the propagation of shocks to African economies.
Proposed topic of the res an emperical analysis on interest rate risk managem...tesfatsion tefera
Risk is defined as anything that can create hindrances in the way of achievement of certain objectives. It can be because of either internal factors or external factors, depending upon the type of risk that exists within a particular situation. Exposure to that risk can make a situation more critical. A better way to deal with such a situation; is to take certain proactive measures to identify any kind of risk that can result in undesirable outcomes. In simple terms, it can be said that managing a risk in advance is far better than waiting for its occurrence. Risk Management is a measure that is used for identifying, analyzing and then responding to a particular risk. It is a process that is continuous in nature and a helpful tool in decision making process. According to the Higher Education Funding Council for England (HEFCE), Risk Management is not just used for ensuring the reduction of the probability of bad happenings but it also covers the increase in likeliness of occurring good things. A model called “Prospect Theory” states that a person is more likely to take on the risk than to suffer a sure loss.
This document presents a methodology for evaluating qualitative forecasts made in the minutes of Federal Open Market Committee (FOMC) meetings from 2006 to 2010. The author aims to assess how the FOMC viewed the Great Recession as it was occurring. A quantitative index will be created from the qualitative statements in the minutes and supplemented with a textual analysis to determine what information the FOMC considered. The methodology makes contributions by providing a consistent way to evaluate qualitative statements and determine the information used to generate the forecasts.
Financial crises have become relatively frequent events since the beginning of the 1980s. They have taken three main forms: currency crises, banking crises, or both - so called twin
crises. As the number of developed economies, developing countries, and economies in transition experienced severe financial crashes researchers are trying to propose a framework for systemic analyses. That is why attempts to advance the understanding of features leading to the outbreak of financial crisis as well as the reasons of vulnerability have become more and more important. In recent years a number of efforts have been undertaken to identify variables that act as early warning signals for crises. The purpose of this paper is to provide some perspective on the issue of early warning signals of vulnerability to currency crises. In particular, it is aimed at presenting and highlighting the main findings of theoretical literature in this area.
Authored by: Magdalena Tomczynska
Published in 2000
Measuring the Dynamics of Financial Deepening and Economic Growth in Nigeria,...iosrjce
The study examined the relationship between financial deepening and economic growth for the
period 1981 to 2013 using empirical evidence from Nigeria. The Engel-Granger two-step cointegration
procedures and Error Correction Model (ECM) were used as the method of estimation. The analyses of
residuals of the OLS regression showed evidence in favour of cointegration between financial deepening and
economic growth. Similarly, estimates from the error correction model provide evidence to show that financial
deepening indicators and GDP series converge to a long-run equilibrium at a reasonably fast rate. The result
points to the fact that the deepening of the financial system can engineer the Nigerian economy to greater
growth.
This document provides an overview of several international financial markets including: the foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market, and international stock markets. It describes the motives and reasons for corporations and investors to use these international markets such as taking advantage of interest rate differences, currency fluctuations, and diversification benefits. The key international financial markets facilitate international trade, investment and borrowing activities.
The document classifies different market structures based on factors like competition, time period, and place. It describes perfect competition as a theoretical market with many small sellers and buyers, homogeneous products, and perfect information. Characteristics include profit maximization and no barriers to entry or exit. Imperfect competition includes monopoly, oligopoly and monopolistic competition where some characteristics of perfect competition are relaxed. Oligopoly describes a market with few dominant firms producing similar or differentiated products where they are interdependent and can influence prices.
The document describes the structure of the Indian financial market. It discusses various segments including the debt market, money market, capital market, and equity market. The money market deals in short term instruments like treasury bills, commercial bills, certificates of deposit, and commercial paper. It functions to reduce transaction costs, provide liquidity, facilitate price discovery, and mobilize savings. The capital market raises long term funds through stock and bond markets. It helps with capital formation, investment opportunities, and economic growth.
The document discusses international financial markets, specifically the foreign exchange market. It describes the different types of foreign exchange markets - spot, forward, futures, and options markets. It also discusses foreign exchange quotations, including direct and indirect quotations. Finally, it outlines some motives for borrowing and investing in foreign markets, such as obtaining lower interest rates or investing in currencies expected to appreciate.
The document discusses the international financial market, which facilitates the global transfer of funds. It describes key segments of the international financial market including the foreign exchange market, international bond market, international equity market, international money market, and international credit market. The foreign exchange market, as the largest financial market, allows participants to exchange currencies and facilitates international trade and transactions through decentralized trading between major banks globally.
There are two main types of exchange rate regimes: fixed and floating. Under a fixed regime, currencies are pegged to an anchor currency, limiting fluctuations. A floating regime allows currencies to fluctuate against each other. The Bretton Woods system established the IMF and pegged currencies to the US dollar. The balance of payments accounts record a country's transactions with the rest of the world. A current account surplus means a country is increasing foreign reserves, while a deficit means reserves are decreasing.
The document discusses various sources of long-term and short-term funding for multinational corporations operating in international financial markets. It outlines types of exposures, sources of long-term funds including international capital markets, foreign exchange markets, and international financial institutions. Sources of short-term funds and cash management techniques for multinationals are also examined, such as trade credit, bill discounting, export financing, and netting of inter-affiliate payments to optimize cash flows.
The document discusses key components of the international financial system including money, banking institutions, financial instruments, financial markets, and central banks. It defines the international financial system as comprising all global financial institutions, borrowers, lenders, and regulators that facilitate the transfer of funds internationally. Key differences between the international monetary system and international financial system are also outlined.
International financial market & instruments module 3Vishnu Vijay
This document provides an overview of international financial markets. It discusses how financial markets facilitate the transfer of funds across borders between lenders and borrowers in different countries. The key segments of international financial markets include international bond markets, equity markets, money markets, credit markets, and foreign exchange markets. Different types of international bonds are described such as foreign bonds, eurobonds, and global bonds. The document also outlines various money market instruments like euro notes, commercial paper, and certificates of deposit.
The selling environment in which a firm produces and sells its product is called a market structure.*
Defined by three characteristics:
The number of firms in the market
The ease of entry and exit of firms
The degree of product differentiation
The document provides an overview of various international financial markets including the foreign exchange market, Eurocurrency market, Eurocredit market, Eurobond market, and international stock markets. It discusses the motives for investors, creditors, and borrowers to use these international markets and how they allow funds to flow more freely globally. The summary briefly outlines some of the key international financial markets and their roles in facilitating international investment and trade.
Chapter 02_Overview of the Financial SystemRusman Mukhlis
This chapter provides an overview of the financial system, including the functions of financial markets and intermediaries in channeling funds from lenders to borrowers. It describes the structure of markets, such as debt versus equity, and primary versus secondary markets. It also discusses the internationalization of markets and the role of regulation in ensuring stability and transparency.
Financial crisis: Non-monetary factors influencing Employee performance at ba...AI Publications
Money and credit fluctuations, financial crises, and governmental responses have come into the spotlight as a result of the crisis that lasted from 2014 to 2018. The primary objective of this study was to investigate the non-financial elements that have an effect on employee performance in the Kurdistan region of Iraq in general and in Erbil in particular. In spite of this, the researcher came up with five assumptions about study that needed to be evaluated and quantified in order to assess how well employees performed amid financial crises. It was found that job security had the highest value, which indicates that job security has the most powerful and positive association with employee performance during financial crisis. On the other hand, job enrichment was found to be the least powerful factor that influences and is related to employee performance during financial crisis in the Kurdistan region of Iraq. The researcher used simple regression analysis to measure the developed research hypotheses.6
Predicting banking crisis in six asian countriesAlexander Decker
This document summarizes a study that aimed to create predictive models of banking crises in six Asian countries from 1999-2012. The study analyzed 15 explanatory variables grouped into 4 categories: macroeconomic factors, internal bank factors, institutional factors, and global factors. Logit analysis found that 9 variables can predict banking crises: real GDP growth, inflation, bank asset quality, liquidity, financial liberalization, central bank independence, world oil prices, U.S. economic growth, and U.S. inflation rate. The document provides context on theories of financial crises and prior research on indicators of banking crises in areas of macroeconomics, internal banking, institutions, and global factors.
Journal of Banking & Finance 44 (2014) 114–129Contents lists.docxdonnajames55
Journal of Banking & Finance 44 (2014) 114–129
Contents lists available at ScienceDirect
Journal of Banking & Finance
j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / j b f
Macro-financial determinants of the great financial crisis: Implications
for financial regulation q
http://dx.doi.org/10.1016/j.jbankfin.2014.03.001
0378-4266/� 2014 Elsevier B.V. All rights reserved.
q We would like to thank the Editor, an anonymous referee, Luc Laeven, Ross
Levine, Marco Pagano, Andrea Sironi, Randy Stevenson, Gianfranco Torriero,
Giuseppe Zadra and seminar participants at IFABS Conference and ISTEIN seminar
for helpful comments. This paper’s findings, interpretations, and conclusions are
entirely those of the authors and do not necessarily represent the views of the
World Bank and the Italian Banking Association.
⇑ Corresponding author. Tel.: +39 02 58362725.
E-mail addresses: [email protected] (G. Caprio Jr.), [email protected]
(V. D’Apice), [email protected] (G. Ferri), [email protected]
(G.W. Puopolo).
Gerard Caprio Jr. a, Vincenzo D’Apice b,c, Giovanni Ferri d,e, Giovanni Walter Puopolo f,⇑
a Williams College, United States
b Economic Research Department of Italian Banking Association, Italy
c Istituto Einaudi (IstEin), Italy
d LUMSA University of Rome, Italy
e Center for Relationship Banking & Economics – CERBE, Italy
f Bocconi University, CSEF and P. Baffi Center, Italy
a r t i c l e i n f o
Article history:
Received 15 April 2012
Accepted 4 March 2014
Available online 29 March 2014
JEL classification:
G01
G15
G18
G21
Keywords:
Banking crisis
Government intervention
Regulation
a b s t r a c t
We provide a cross-country and cross-bank analysis of the financial determinants of the Great Financial
Crisis using data on 83 countries from the period 1998 to 2006. First, our cross-country results show that
the probability of suffering the crisis in 2008 was larger for countries having higher levels of credit
deposit ratio whereas it was lower for countries characterized by higher levels of: (i) net interest margin,
(ii) concentration in the banking sector, (iii) restrictions to bank activities, (iv) private monitoring. The
bank-level analysis reinforces these results and shows that the latter factors are also key determinants
across banks, thus explaining the probability of bank crisis. Our findings contribute to extend the analyt-
ical toolkit available for macro and micro-prudential regulation.
� 2014 Elsevier B.V. All rights reserved.
1. Introduction ment (BCBS, 2010a), has focused more on the stability of the finan-
As much as it was known that the Great Depression of the 1930s
was the acid test for any reputable macroeconomic theory, the out-
break of the Great Financial crisis in 2008 has shaken not only
financial institutions, but also long-held beliefs and theories on
how the regulation of the financial system should be structured,
with renewed emphasis on macro-prudential supervision and
reforming micro-pr.
This document introduces an updated database on financial institutions and markets across countries over time. Some key findings:
1) Financial systems have deepened globally in recent decades, but progress has been uneven, concentrated in high-income countries. Markets have deepened more than banks.
2) Banking systems have become larger and more efficient in high-income countries, with declining stability leading up to the 2007 crisis.
3) Financial integration has increased via cross-border lending and bonds, though low/middle-income countries have seen more remittance flows than lending.
DETERMINANTS OF BANK-SPECIFIC AND MACROECONOMIC FACTORS THAT ARE AFFECTING T...Uni-assignment
DETERMINANTS OF BANK-SPECIFIC AND MACROECONOMIC FACTORS THAT ARE AFFECTING THE PROFITABILITY OF COMMERCIAL BANKS A STUDY ON THE BRIC FROM THE EMERGING MARKET
This document introduces a new Global Financial Development Database that benchmarks the financial systems of 205 economies from 1960 to 2010. The database measures four characteristics of financial institutions and markets: (1) size (financial depth), (2) access, (3) efficiency, and (4) stability. It uses these measures to characterize and compare financial systems across countries and over time, as well as examine the relationship between financial systems and policies. The analysis presented in the database and document provide an empirical framework for describing the multi-dimensional nature of financial systems around the world.
This document analyzes how banking competition may affect the stability of banking systems. It uses panel data techniques and indicators for 47 countries between 1990 and 1997. The main findings show that banking concentration and foreign ownership are associated with bank-based financial systems and financial underdevelopment, while domestic and publicly owned banks are associated with market-based and developed financial systems. The study also finds that banking credit and bank-based financial systems enhance banking fragility, while banking concentration is not a significant determinant. The results suggest that financial structure and ownership regimes are important for assessing fragility.
This document summarizes a research paper that analyzes the influence of banking development, the agriculture sector, and the manufacturing industry on economic growth in Indonesia from 1988 to 2008. The paper uses vector autoregression models to examine the relationships between variables like banking assets, credits, third party funds, GDP growth, agriculture contribution, and manufacturing contribution. The models find that banking development, agriculture, and manufacturing all positively impact economic growth, though their individual contributions are relatively small. Optimal lags in the models range from 7 to 10 quarters, indicating influences occur over 1-2 years. The results support theories that financial development and specific sectors influence economic growth.
Macroeconomic factors that affect the quality of lending in albania.Alexander Decker
This document analyzes the relationship between macroeconomic factors and credit quality in the Albanian banking system from 2005 to 2013. It finds that non-performing loan rates increased, influenced by the economic slowdown after 2008 and currency depreciation. Unemployment, lower GDP growth, reduced remittances, and inflation stability negatively impacted borrowers' ability to repay loans. A regression analysis showed credit risk significantly increased when GDP growth declined and interest rates rose. Macroeconomic changes, like deteriorating GDP growth, substantially affected the level of non-performing loans in Albanian banks.
Lesson 6 Discussion Forum Discussion assignments will beDioneWang844
Lesson 6 Discussion Forum :
Discussion assignments will be graded based upon the criteria and rubric specified in the Syllabus.
550 Words
For this Discussion Question, complete the following.
1. Review the two articles about bank failures and bank diversification that are found below this. Economic history assures us that the health of the banking industry is directly related to the health of the economy. Moreover, recessions, when combined with banking crisis, will result in longer and deeper recessions versus recessions that do occur with a healthy banking industry.
2. Locate two JOURNAL articles which discuss this topic further. You need to focus on the Abstract, Introduction, Results, and Conclusion. For our purposes, you are not expected to fully understand the Data and Methodology.
3. Summarize these journal articles. Please use your own words. No copy-and-paste. Cite your sources.
Please post (in APA format) your article citation.
Reply to Post 1: 160 words and Reference
Discussion on Bank’s failures and its diversification
Over the last two decades, business cycle volatility has decreased in the US. For example, some analysts claimed that companies handle inventory better today than ever, or that advances in financial systems have helped smooth industry volatility. Some emphasized stronger economic policy. Banking changes were also drastic in this same era, contributing to the restructuring and convergence of massive, global banking institutions in a better-organized structure. The article (Strahan, 2006) points out that some regulatory reform driven by individual countries rendered it possible for banks to preserve their resources and income by gradually diversifying from local downturns. Both low state volatility rates and a decline in partnerships between the local market and the central banking sector is a net influence on the diversification in banks. Considering the less fragile state economies following these intergovernmental financial reforms, there are some signs that financial convergence – while certainly not the only piece of the puzzle – has been less unpredictable.
Another article (Walter, 2005) argues that a long-standing reason for bank collapses during the crisis is a contagion, which contributes to systemic bank failures and the collapse of one bank initially. This indicates why several losses in the crisis period were unintentional, which ensured that the banks remained stable and endured without contagion-induced falls. The response to the contagion was the central government’s deposit policy, bringing an end to defaults. Nevertheless, since the sequence of errors began in the early 1920s, well before contagion was evident, the underlying trigger must be contagion.
Now it seems like the bank sector has undergone a shake-out that was worsened during the crisis by the deteriorating economic conditions. Although the reality that incidents occurred almost syno ...
Measuring the Dynamics of Financial Deepening and Economic Growth in Nigeria,...iosrjce
The study examined the relationship between financial deepening and economic growth for the
period 1981 to 2013 using empirical evidence from Nigeria. The Engel-Granger two-step cointegration
procedures and Error Correction Model (ECM) were used as the method of estimation. The analyses of
residuals of the OLS regression showed evidence in favour of cointegration between financial deepening and
economic growth. Similarly, estimates from the error correction model provide evidence to show that financial
deepening indicators and GDP series converge to a long-run equilibrium at a reasonably fast rate. The result
points to the fact that the deepening of the financial system can engineer the Nigerian economy to greater
growth.
Determinants of Bank Failure in Nigeria: An Empirical InvestigationAJHSSR Journal
This study investigates the determinants of bank failure in Nigeria from 1970-2013. It uses
Autoregressive Distributed Lag (ARDL) approach in the analysis and further examines the extent to which these
determinants lead to bank failure in Nigeria. The study found that there is significant long run relationship between
bank failure and exchange rate, interest rate, capital adequacy ratio, non-performing loans and liquidity ratio, but an
insignificant relationship with inflation in Nigeria. On the direction of causality, the study found a bidirectional
causal relationship between bank failure and, capital adequacy ratio and non-performing loans (NPL), while a
unidirectional causal relationship was found between bank failure and exchange rate but shows no causal
relationship between bank failure and, inflation and interest rate. The study therefore conclude that bank failure is
chiefly determined by capital adequacy ratio (CAR), exchange rate, interest rate and liquidity ratio in Nigeria, and
that Non-Performing Loans (NPL) leads to the degradation of the financial sector thereby making the financial
institutions vulnerable to failure. It is recommended that monetary authorities in Nigeria must ensure that all banks
operating in the country comply with the CAR guideline to guard against sudden bank failure, and that financial
institutions should make sure that all necessary checks prior to the advancement of credit such as adequate
collateral and viable financial projection be dully carried out and satisfied in order to forestall the incidence of bank
failure in Nigeria.
This paper presents a comprehensive database on systemic banking crises during 1970–2011. The paper proposes a methodology to date banking crises based on significant financial distress in the banking system and significant policy interventions in response. In total, 147 banking crises were identified during this period. The database also includes dates for other crises such as currency and sovereign debt crises. Output losses were typically larger for sovereign debt and banking crises compared to currency crises. Advanced economies experienced larger increases in public debt and relied more on macroeconomic policies than emerging markets to respond to banking crises.
This document discusses how banks can leverage stress testing to improve business planning and forecasting. Currently, business planning is done separately by each business unit without considering interactions between units or external economic factors. The document argues that enhanced stress testing can help estimate the impacts of macroeconomic shifts on business metrics and guide strategic decisions. It outlines how stress testing has evolved from a siloed risk management tool pre-financial crisis to a more rigorous supervisory process post-crisis. Still, banks are not fully utilizing stress testing's potential to inform strategic planning, funding strategies, and contingency planning. The document advocates using stress testing for these strategic purposes going forward.
This document discusses modeling the relationship between state-level commercial bank failure rates and regional economic indicators using regression analysis. It provides background on the recent rise in bank failures and reviews literature examining the impact of economic conditions on individual bank performance and survival. The study aims to test whether odds of bank failure in a state are dependent on seven regional economic indicators like GDP, unemployment, housing prices, and employment levels. If validated, the regression model could provide insight into bank-region interdependence and inform regulatory policy.
The Relationship between Financial Structure and GDP.Stefano Valeri
This document analyzes the relationship between different financial structures and GDP levels across countries. It identifies three main types of financial systems: bank-based, market-based, and government-based. These systems are characterized by five factors: solvency, profitability, market efficiency, foreign presence, and core revenue/cost structure. The document uses factor analysis to develop indexes for these factors. It then performs cluster analysis to group countries into the three financial system types. Finally, it uses regression analysis to test if each system type is related to GDP levels, finding that only market-oriented systems are strongly related to economic development as measured by GDP.
This document discusses empirical research on the determinants of bank lending across countries. It proposes estimating equations to model domestic credit levels based on bank balance sheet and capital requirements approaches. The analysis will use data from 146 countries over 1990-2013 to examine how economic growth, banking system health, and external capital flows influence domestic credit after controlling for other factors. Key determinants expected to impact credit include deposits, interest rates, costs, capital levels, and macroeconomic conditions.
Sector Portfolios across the Crisis and Risk behaviourSimone Guzzo
This paper analyzes the performance of the US financial sector before and after the 2007-2008 financial crisis, compared to the information technology and industrial sectors. It builds portfolios of firms in each sector and analyzes their performance trends over time. It finds that the financial sector had the worst reaction to the crisis, underperforming the other sectors. The financial sector decline also amplified the effects of the crisis on the other sectors. The paper further examines the influence of leverage on firms' performance during the crisis.
This document summarizes a research study that investigates the effects of bank diversification, size, and the global financial crisis on risk-taking and performance in emerging economies. The study uses data from 542 bank-years in Bangladesh and South Africa between 2004-2015. The key findings are:
1) Higher non-performing loan ratios make banks less profitable and more unstable.
2) Benefits from bank diversification vary and confirm portfolio diversification theory.
3) Small banks in Bangladesh gain more from diversification than large banks, while large banks in South Africa gain more than small banks.
4) During financial crises, emerging economies can use diversification to control risk and improve performance
Similar to Financial structure, financial develop and banking fragility, international evidence (20)
This document provides a summary of Mauricio Ramirez Grajeda's education and professional experience. It lists that he received a Ph.D from Ohio State University in 2006, has worked as a researcher and professor at the University of Guadalajara since 2008, and is a member of Mexico's National Research System since 2008. It also notes that he has published papers in academic journals and books and taught economics courses at several universities.
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Financial structure, financial develop and banking fragility, international evidence
1. MP A
R
Munich Personal RePEc Archive
Financial structure, financial
development and banking fragility:
International evidence
Ruiz-Porras, Antonio
Universidad de Guadalajara, CUCEA
12. December 2008
Online at http://mpra.ub.uni-muenchen.de/12124/
MPRA Paper No. 12124, posted 12. December 2008 / 18:29
2. FI A CIAL STRUCTURE, FI A CIAL DEVELOPME T A D BA KI G
FRAGILITY: I TER ATIO AL EVIDE CE*
(This version: December 12th, 2008)
Antonio Ruiz-Porras**
Departamento de Métodos Cuantitativos
Universidad de Guadalajara, CUCEA
Abstract
We study the effects of financial structure and financial development on banking fragility.
We develop our study by using fixed-effects panel-data regressions and by controlling the
effects of certain banking indicators. We use individual and principal-components
indicators of the activity, size and efficiency of intermediaries and markets. The
indicators include data for 211 countries between 1990 and 2003. Our main findings
suggest that banking stability is enhanced in market-based financial systems. Financial
development reduces it. However this fragility-enhancing effect can be unveiled only
when we account for financial structure. Thus, financial structure and development jointly
matter to assess banking fragility.
Resumen
Estudiamos los efectos de la estructura financiera y el desarrollo financiero en la
fragilidad bancaria. Nuestro estudio se desarrolla con regresiones para datos de panel con
efectos fijos y controlando los efectos de ciertos indicadores bancarios. Usamos
indicadores individuales y de componentes principales, que evalúan la actividad, tamaño
y eficiencia de los intermediarios y mercados financieros. Los indicadores incluyen datos
para 211 países entre 1990 y 2003. Nuestros hallazgos sugieren que la estabilidad
bancaria se incrementa en sistemas financieros donde predominan los mercados. El
desarrollo financiero la reduce. Sin embargo, este efecto desestabilizador es evidente solo
cuando se considera la estructura financiera. Así, la estructura financiera y el desarrollo
financiero conjuntamente influyen en la fragilidad bancaria.
JEL Classification: G21, N20, E44
Keywords: Banks, fragility, financial structure, financial development
*
I am grateful to Ayşe Evrensel, Nancy García-Vázquez, Andrés Zamudio-Carrillo and two referees of
Análisis Económico for valuable comments and suggestions. I am also grateful to Junior Alfredo Martínez-
Hernández and Demián Vergara-Salgado for research assistance. However, the usual disclaimer applies.
**
Address for correspondence: Departamento de Métodos Cuantitativos. Universidad de Guadalajara,
CUCEA. Periferico Norte 799, Núcleo Universitario Los Belenes, 45100, Zapopan, Jalisco, México. Tel:
++ (52) (33) 3770 3300, Ext. 5291. Fax.: ++ (52) (33) 3770 3300, Ext. 5227.
0
3. FI A CIAL STRUCTURE, FI A CIAL DEVELOPME T A D BA KI G
FRAGILITY: I TER ATIO AL EVIDE CE
1. Introduction
One of the main concerns among economists relates to the study of the determinants of
banking crises. Particularly, financial structure determinants have been considered
important to understand them [Demirguc-Kunt and Detragiache (1998)]. Here we study
the effects of financial determinants on banking fragility. We develop our study by using
panel-data techniques and by controlling for banking activity, size and concentration. We
use indicators of the activity, size and efficiency of intermediaries and markets for 211
countries during the period 1990-2003.
The study is motivated by the necessity to understand the determinants of banking crises.
Particularly, our interest on the financial determinants relates to an old concern in
economics about the effects that financial systems may have on the performance of the
agents within an economy and the economy itself.1 This concern has encouraged the
development of theories and empirical research to assess the relative merits of different
financial systems. However we are far from a consensus about which financial systems
may contribute to achieve specific goals, like financial stability.
We believe that the understanding the financial determinants is particularly relevant to
avoid the economic costs of banking crises. Solely the costs of the recent global financial
1
Such concern can be traced back to the writings of Bagehot (1873). See Levine (2002) and Allen and Gale
(2004) for reviews on the relationships between financial structure and economic performance.
1
4. crisis of 2007-2008 have been estimated above 1.4 trillion US dollars [IMF (2008:xiii)]. 2
This crisis, the worst since World War II, has been considered as “a modern form of a
traditional banking crisis” [Vives (2008:99)]. Moreover, according to several authors, its
origins can be traced on issues related to financial structure and financial development.3
Thus, the study of these determinants might contribute to avoid further costly crises.
The necessity to develop further investigations on the determinants of banking fragility
cannot be minimised. The literature on the impacts of financial structure on banking
crises is relatively scarce and in an early stage of development. Until recently, issues
regarding data availability, accounting, regulatory and economic methods have inhibited
the development of such studies. Indeed, existing studies on the relationship between
financial structure and banking fragility are mainly descriptive.4 Thus there is no reliable
guide regarding how to avoid financial crises in national or global contexts.
We aim at clarifying how financial structure and financial development determinants may
relate to banking fragility by suggesting answers to the following questions: Does
financial structure matter to assess banking performance? What are the effects, if any, of
financial structure and development on banking crises? Can we analyse these two
determinants independently one of another? Which type of implications may be derived
from these findings? Here we analyse these questions by using a variation of the failure-
determinant methodology that includes panel-data regressions.
2
See Barrel and Davies (2008) for a summary of the evolution of the financial crisis of 2007-2008.
3
See Felton and Reinhart (2008) for a compilation of essays among academic economists and policymakers
about the origins, evolution and policy responses to the global financial crisis.
4
To our knowledge the first study on this relationship is the one of Allen (2001).
2
5. We develop this study in three stages. First we build the financial indicators based on
measures of activity, size and efficiency of intermediaries and markets. Later we estimate
the individual and joint effects of financial development and structure on banking fragility
with three sets of fixed-effects logit regressions for panel-data. Finally we use omitted-
variable tests to evaluate the pertinence of the joint study of the effects of financial
structure and development. We use individual and principal-components indicators for the
empirical assessments.
Methodologically, our study has some specific features that differentiate it with respect to
others: A first feature is that we use internationally comparable data from the most
extensive datasets publicly available for 211 economies during the period 1990-2003.5
The second one is that we use panel-data techniques that allow us to control the effects of
time-constant unobserved heterogeneity among countries. Finally the last distinctive
feature of our study is that we analyse the effects of individual and aggregate indicators of
financial structure and development on banking fragility.
Our econometric results have implications for theoretical and practical purposes.
Specifically the assessments suggest that financial structure and financial development
jointly matter to assess the stability of banking systems. Banking stability is enhanced in
economies with market-based financial systems. Financial development reduces it.
5
We use panel-data extracted from the database on financial development and structure [Beck, Demirguc-
Kunt and Levine (2006)], and from the datasets on episodes of systemic and borderline banking crises
[Caprio and Klingebiel (2003)]. The datasets are available at the World Bank´s website:
http://econ.worldbank.org
3
6. However the latter fragility-enhancing effect can be unveiled only when we account for
financial structure. Furthermore our findings suggest that the size of the banking sector
seems to reduce banking stability and that lending activities enhance it.
This study complements and extends the ones of Demirguc-Kunt and Detragiache (1998)
and the ones of Ruiz-Porras (2006) and (2008). The first study shows that economies with
low growth rates, high rates of inflation and interest rates and BOP problems are likely to
experience crises. The second study describes the “stylised facts”, between financial
systems and banking crises. Concretely, it shows that crises are more likely in bank-based
financial systems and that financial development enhances banking stability. Finally the
third study analyses the relationship between banking competition and banking crises.
The article is organised in seven sections. Section 2 reviews the literature. Section 3
describes the data. Section 4 discusses methodological issues. Section 5 shows the
outcomes of the individual assessments of the effects of financial structure and
development. Section 6 focuses on the joint analysis of such effects and its econometric
justification. Section 7 summarises and discusses the main findings. The appendixes
include further econometric estimations and indicate the countries and data of recognised
banking crises used in the study.
4
7. 2. Financial structure, financial development and banking fragility
Theory suggests that the opportunities to deal with financial risks and to engage on risk
sharing activities depend on the particular properties of financial systems [see Allen and
Gale (2000) and (2004)]. Financial competition among financial markets and banks,
which is reflected on the financial structure of an economy, provides different incentives
and opportunities for risk management. The management of risks is the main activity of
banks. Thus, it is very likely that banking performance, and the likelihood of crises, may
depend on the structure and degree of development of the financial systems.
Why financial structure may be related to the likelihood of banking crises? According to
the theory on comparative financial systems, such relationship can be explained in terms
of financial competition. Competition between markets and banks erodes the
opportunities to engage in inter-temporal risk smoothing activities [See Allen and Gale
(2000) and (2004)]. Such erosion is particularly relevant because banking crises have
been defined as equilibrium outcomes in a context of inter-temporal risk sharing [See
Diamond and Dybvig (1983)].6
However, we must emphasise that the relationship between financial systems and banking
crises may not be a straightforward one. Theory has not dealt enough with issues
regarding how risks may influence intermediaries´ behaviour [see Allen and Santomero
(1997) and Scholtens and Van Wensveen (2000)]. We cannot dismiss the possibility of
bidirectional effects between financial development and banking crises. Historically,
banking crises have had a significant impact on the development of financial systems.
5
8. Empirical studies that assess how different financial structures may affect the
performance of banks in an international context are scarce. The first study that analyses
the relationship between financial structure and banking performance is the one of
Demirguc-Kunt and Huizinga (2001). Among their findings, they show that in emerging
economies, financial systems tend to be bank-based and relatively underdeveloped.
However they do not find any conclusive evidence to support the hypothesis that financial
structure has a significant, independent influence on bank margins and profits.
The hypothesis that financial structure matters to explain banking fragility has been
explicitly stated by Demirguc-Kunt and Detragiache (1998).7 Such hypothesis has support
on the study of Ruiz-Porras (2006). There he finds that financial development is
associated to market-based financial systems and that such association is magnified
during episodes of banking crises. Thus, he concludes that financial structure,
development and banking crises are interrelated. Such conclusion is reached by analysing
data for 47 economies during the period 1990-1997.
Further studies provide indirect evidence to support the idea that financial determinants
might explain banking crises. Among these studies, we include the ones of Loayza and
Ranciere (2006) and Evrensel (2008). The first study shows that financial liberalisation,
as a mean of financial development and change in financial structures, can generate short-
6
See De Bandt and Hartmann (2002) for a survey on systemic risk in banking.
7
Demirguc-Kunt and Detragiache (1998:105) indicate that “variables that capture the structure of the
banking system and, more generally, the structure of financial markets…, are likely to play an important
6
9. run financial instability and long-run growth. The second one suggests that financial and
economic development and banking concentration might delay banking crises. In both
studies, financial development seems to be a significant determinant.
Methodologically, we should point out that none of the previous empirical studies is a
failure-determinant one. This type of studies attempts to explain recognised insolvency
situations among intermediaries or troubled banking systems. They seek to identify, ex-
post, the factors that may affect the likelihood of banking problems. Currently there are
not failure-determinant studies that have focused on how financial structure determinants
may affect banking crises.8 So, the development of such studies may to be particularly
necessary to improve our understanding on banking fragility.
We are far from a consensus regarding the effects of financial determinants on banking
crises. The theoretical and empirical literature on comparative financial systems is rather
limited and inconclusive to deal with this issue. Particularly, we believe that further
failure-determinant studies may be useful at clarifying the relationships between financial
systems and banking fragility.
3. Banking and financial indicators
Here we describe the financial and banking indicators used in our study. Such indicators
are built according to the guidelines proposed by Demirguc-Kunt and Detragiache (1998)
and Levine (2002). Thus, we consider as a stable banking system as one that does not
role in breeding banking crises, but they are neglected here because of lack of data. A study limited to a
smaller set of countries that includes more structural variables might yield to more interesting results”.
8
Ruiz-Porras (2008) includes aggregate financial structure and development determinants as control
variables to assess the relationship between banking competition and banking fragility for 47 economies
7
10. experience a recognised episode of borderline or systemic banking crisis. In addition, we
follow the convention that financial development depends to the level of development of
both intermediaries and markets. Finally we consider that financial structure depends on
the degree to which a financial system is based on intermediaries or markets.
We build the financial structure and development indicators with panel-data extracted
from the revised dataset of Beck, Demirguc-Kunt and Levine (2006). We captured the
main features of the financial and banking environment. We use the datasets of Caprio
and Klingebiel (2003) to build the qualitative indicators of fragility. Datasets allow us to
build our sample of financial and banking indicators. The main advantage of using these
datasets is that they provide us with consistent data across countries and across time.
We combine the three datasets to develop our failure-determinant study for the period
9
1990-2003 [See Table 1]. Here it is worthy to indicate that the dataset of Beck,
Demirguc-Kunt and Levine (2006) includes panel-data for 211 countries for the period
1960-2004. Specifically, the dataset includes data for 58 low-income, 54 lower-middle,
40 upper-middle, 32 high-income-non-OECD and 26 high-income-OECD countries. The
datasets of Caprio and Klingebiel (2003) include data on recognised borderline and
systemic episodes of banking crises for several countries during the period 1974-2003. 10
during the period 1990-1997. His findings suggest that the orientation toward marked-based financial
systems might enhance banking stability.
9
The countries and episodes of banking crises considered in our study are contained in Appendix B.
10
A limitation of the datasets of Caprio and Klingebiel (2003) refers to the characterisation and coverage of
banking crises. In many countries, banking problems are underestimated and also the size of their costs.
Moreover, the time span of banking crises is not easy to determine. Even at a mere qualitative level, the
characterisation of crises may be difficult to establish for certain countries because they are not officially
recognised. Thus, we cannot dismiss the possibility that certain “periods of banking stability”, in our
database, may occur in reality due to missing or non reported data on banking crisis episodes.
8
11. Table 1. Financial and Banking Data
Definition Variable Period Countries Observations
(Crises) (Crises)
Banking fragility variables
Dummy variable on borderline
episodes of banking fragility BORDER 1974-2003 211 6330
(Banking crisis=1, otherwise=0) (44) (278)
Dummy variable on systemic
episodes of banking fragility SYSTEMIC 1974-2003 211 6330
(Banking crisis=1, otherwise=0) (92) (697)
Financial structure and development variables
Private credit by deposit money
banks and other financial PCRDBOFGDP 1960-2004 161 4597
institutions to GDP
(Private credit ratio)
Stock market capitalisation to
GDP (Market capitalisation ratio) STMKTCAP 1976-2004 111 1541
Stock market total value traded to
GDP STVALTRADED 1975-2004 111 1588
(Total value traded ratio)
Banking system variables
Concentration
(Ratio of the 3 largest banks to CONCENTRATION 1990-2004 160 1790
total banking assets
Deposit money bank assets to
GDP (Bank size ratio) DBAGDP 1960-2004 161 4606
Overhead costs of the banking
system relative to banking system OVERHEAD 1990-2004 158 1738
assets
Private credit by deposit money
banks to GDP (Bank credit ratio) PCRDBGDP 1960-2004 161 4582
Notes:
- The database on banking crises includes the two qualitative variables included here. A banking crisis
is defined as systemic if most or all banking system capital is eroded by loan losses (5% of assets in
developing countries). A non systemic banking crisis includes borderline and smaller banking crises.
- Annual observations associated to episodes of recognised banking crises are given in parenthesis.
- The complete financial development and structure database includes statistics on the size, activity and
efficiency of various intermediaries (commercial banks, insurance companies, pension funds and non-
deposit money banks) and markets (primary equity and primary and secondary bond markets).
9
12. Methodologically, we define nine individual indicators to describe the financial and
banking environments prevailing in every country every year according to data
availability. We organise these indicators into three assortments. The structural
assortment contains measures of the activity, size and efficiency of stock markets relative
to that of banks. The development assortment contains measures of the activity, size and
efficiency of stock markets and banks. Finally the banking assortment contains measures
of activity, size and concentration of banking systems.
We follow Levine (2002) to build the financial assortments that capture the specific
features of the financial system in a country. The structural assortment is integrated by the
Structure-Activity, Structure-Size and Structure-Efficiency indicators. Here market-based
financial systems are associated to large values of the indicators and bank-based ones to
small values. The development assortment is integrated by the Finance-Activity, Finance-
Size and Finance-Efficiency indicators. Financial development is associated to large
values of the indicators and underdevelopment to small ones.11
We summarise the information content of these assortments by using two aggregate
indicators of financial structure and development. We follow the approach of Levine
(2002) to define them. Such indicators are built with principal-component methods.
Specifically they are the Structure-Aggregate and the Finance-Aggregate ones. We use
the aggregate indicators as indexes of scale for the level of development and of the
11
The financial indicators may have limitations to describe the main features of financial systems.
Particularly, Levine (2002) indicates that the Finance-Size and the Structure-Efficiency indicators have
some problems to be considered good measures of financial development and financial structure. Here we
include these indicators for completeness and consistency with other studies.
10
13. relative prominence of markets in the financial system. These two indicators complement
the previous ones included in the structure and development assortments.
Finally we describe the main features of the banking sector with the third assortment. The
banking assortment is integrated by the Banking-Activity, Banking-Size and Banking-
Concentration indicators. Large values of the first two indicators are associated to high
levels of credit activity and to a large size of banking assets [See Demirguc-Kunt and
Huizinga (2001)]. High values of the last indicator are associated to concentrated banking
systems. We use these three indicators as control variables in the panel-data models. They
are included here under the basis of data availability.12
12
We are aware that important control variables are missing. We do not include them due to the lack of
data. These omissions include economic indicators and variables to describe different regulatory regimes.
11
14. Table 2. Banking and Financial Indicators
ame Definition Measurement
Banking Fragility Indicators
Binary variable for fragility: Recognised episodes of
Crises Banking crisis=1 systemic and/or borderline
Non banking crisis=0 banking crises
Financial Structure Indicators
STVALTRADED Activity of stock markets
STCACT = ln
Structure Activity PCRDBGDP relative to that of banks
STMKTCAP Size of stock markets relative to
Structure Size STCSIZ = ln that of banks
PCRDBGDP
STCEFF = Efficiency of stock markets
Structure Efficiency ln(STVALTRADED * OVERHEAD) relative to that of banks
First principal component of the Scale index of financial
Structure Aggregate set of individual financial structure.
structure indicators.
Financial Development Indicators
FI ACT = Activity of stock markets and
Finance Activity ln(STVALTRADE PCRDBOFGDP intermediaries
D* )
FI SIZ = Size of stock markets and
Finance Size ln (STMKTCAP * PCRDBOFGDP ) intermediaries
STVALTRADED Financial sector efficiency
FI EFF = ln
Finance Efficiency OVERHEAD
First principal component of the Scale index of financial
Finance Aggregate set of individual financial development.
development indicators.
Banking System Indicators
B KACT = ln (PCRDBGDP ) Credit activity of the banking
Banking Activity system
B KSIZ = ln (DBAGDP ) Overall size of the banking
Banking Size sector
B KCO = Banking system concentration
Banking Concentration ln(CONCENTRATION)
Notes: The characterisation of the financial and banking systems depends on the indicators´ relative
value (with respect to the sample medians). Large values of the financial structure indicators are
associated to market-based financial systems; small ones to bank-based ones. Large values of the
financial development indicators relate to high levels of financial development.
12
15. 4. Methodological issues on the econometric assessment
In this section we discuss some methodological issues regarding our assessment on the
effects of financial determinants on banking fragility. Particularly, we define the scope
and limits of our research. From an empirical perspective, its main distinctive feature is
that the failure-determinant framework relies on fixed-effects logit models for panel-data.
We combine the properties of time-series and cross-sectional data for estimation
purposes. The assessment is based on estimations of three functional form specifications.
We assess the effects of financial structure and development by estimating the
probabilities of occurrence of banking crises according to the conventions of the failure-
determinant literature. Specifically, given cross-country annual data for n economies, we
have that, for each period t, the i-country is either experiencing a banking crisis, or it is
not. The probability that a crisis may to occur is hypothesised to be a function of a matrix
of K vector-variables x it = x it1 , x it 2 ,..., x itK . Such matrix describes the financial
environment through the inclusion of failure-determinant and control variables.
We study the specific and joint effects of financial determinants with three subunits of the
independent-variable matrix x it . We differentiate each specification by using a
S
superscript. The first design x it focuses on the effects of the financial structure indicators.
F SF
The second one x it focuses on the effects of the financial development. The last x it
focuses on the joint effects of both indicators. Thus the set of designs of the matrix x it is:
x it = [0, Fit , Bit ]
F
(1)
13
16. x it = [S it ,0, Bit ]
S
(2)
x it = [S it , Fit , Bit ]
SF
(3)
Where
S it Vector of financial structure indicators
Fit Vector of financial development indicators
Bit Vector of banking indicators
Our analysis is based on estimations of linear functional forms that relate the coefficient
vector β with the matrix x it . Linearity is a convention in the failure-determinant
literature. Here denominate the specification that relates x it and β S = [β S ,0, β B ] as the
S
financial-structure specification (FS specification). We denominate the one that relates
x it and β F = [0, β F , β B ] as the financial-development specification (FD specification).
F
Finally we denominate the joint specification that relates x it and β SF = [β S , β F , β B ] as
SF
the financial-structure-and-development specification (FSD specification).
The analysis of how financial structure and development may affect the stability of
banking systems depends on several estimations of the coefficient vector β . We use
these estimations to clarify the effects of the financial system determinants. The
assessment of each specification depends on four estimations; three estimations for the
individual indicators and one to the aggregate indicators. We do not combine indicators of
the same type due to the potential multicollinearity that may exist among them.
14
17. Econometrically, it can be argued that endogeneity may arise in our assessment
framework. Endogeneity can arise due to the omission of relevant variables or or because
of simultaneity. Here we deal with endogeneity issues with likelihood-ratio (LR) tests for
SF
omitted variable bias. Such tests assume that x it includes irrelevant variables and that
S F
the x it , and x it may be correctly specified. Thus the hypothesis that financial structure
and development effects must to be analysed jointly predicts that the null hypothesis of
S F
correct specification of x it , or x it will be rejected.
Furthermore, endogeneity and causality problems may be related. Here we use lags of the
independent variables to avoid potential simultaneity and endogeneity problems arising
from potential two-way relationships. In addition, we deal with causality issues
postulating certain hypotheses about the signs for the estimated coefficients. Specifically,
the hypothesis that market-based financial systems enhance banking stability, predicts
that the estimated signs of β S will be negative. The hypothesis that financial development
also enhances stability, predicts that the signs of β F will be negative too.13
5. Econometric assessment of the effects of the individual determinants14
Here we report the outcomes of the sets of models used to assess the specific effects of
the financial determinants on banking crises. The outcomes associated to the eight
estimations of the specifications defined by equations (1) and (2). We compare the
13
Notice that our study assumes that the design of the financial and banking systems and the level of
financial development are exogenous of banking crises. this is a very restrictive assumption.
14
The econometric software used for the assessments is Stata 9.0.
15
18. evidence with the theoretical predictions. All the estimations included the banking
indicators as control variables and the lagged financial indicators as independent ones.
The first set of failure-determinants models focuses on the effects of the financial
structure determinants on fragility. We summarise their results in Table 3.
Table 3. Financial Structure and Banking Crises
( FS specification)
Model Aggregate Activity Size Efficiency
Regression Indicators
Structure Aggregate -1.03*** - - -
(lagged) (-4.64)
Structure Activity - -0.64*** - -
(lagged) (-4.35)
Structure Size - - -0.83*** -
(lagged) (-3.31)
Structure Efficiency - - - -0.85***
(lagged) (-4.97)
Banking Activity -4.29*** -5.07*** -5.43*** -3.79***
(-3.84) (-4.64) (-4.89) (-3.43)
Banking Size 4.99*** 5.74*** 6.20*** 4.98***
(3.72) (4.57) (4.84) (3.82)
Banking 0.99 0.40 0.80 1.03
Concentration (1.05) (0.58) (1.07) (1.18)
Observations 339 431 411 371
LR-CHI2(4) 67.00*** 63.44*** 55.49*** 68.81***
Prob > chi2 0.000 0.000 0.000 0.000
Log Likelihood -119.92 -158.77 -155.68 -129.43
Notes: The dependent variable is the banking crisis dummy. The z statistics are given in parenthesis and
are based on IRLS variance estimators. One, two and three asterisks indicate significance levels of 10, 5
and 1 percent respectively.
Table 3 shows that the likelihood of banking crises is associated to a relative decrease in
the level of activity of stock markets with respect to that of banks. All the financial
structure determinants are negative and statistically significant (1 percent significance
level). The consistency of the estimated associations holds independently of the specific
16
19. failure-determinant model estimated. Thus the evidence suggests that market-based
financial systems enhance banking stability. Thus, it seems that financial structure matters
to assess the stability of banking systems.
The second set of failure-determinants models focuses on the effects of the financial
development determinants on fragility. We summarise their results in Table 4.
Table 4. Financial Development and Banking Crises
( FD specification)
Model Aggregate Activity Size Efficiency
Regression Indicators
Finance Aggregate -1.01*** - - -
(lagged) (-3.31)
Finance Activity - -0.49*** - -
(lagged) (-3.34)
Finance Size - - -0.36 -
(lagged) (-1.57)
Finance Efficiency - - - -0.63***
(lagged) (-4.05)
Banking Activity -3.60*** -4.33*** -5.01*** -3.74***
(-3.07) (-3.90) (-4.20) (-3.36)
Banking Size 5.23*** 5.91*** 6.47*** 5.00***
(3.93) (4.77) (5.01) (3.83)
Banking 1.41 0.60 1.25 1.47*
Concentration (1.48) (0.84) (1.62) (1.71)
Observations 339 431 411 371
LR-CHI2(4) 52.81*** 54.15*** 45.79*** 57.30***
Prob > chi2 0.000 0.000 0.000 0.000
Log Likelihood -127.01 -163.41 -160.53 -135.18
Notes: The dependent variable is the banking crisis dummy. The z statistics are given in parenthesis and
are based on IRLS variance estimators. One, two and three asterisks indicate significance levels of 10, 5
and 1 percent respectively.
Table 4 reports the outcomes associated to the financial-development specification. It
shows that the likelihood of banking crises is associated to a relative decrease in the level
of development of intermediaries and financial markets. All the financial development
17
20. determinants are negative and most of them are statistically significant (1 percent
significance level). Again, the consistency of the estimated associations holds
independently of the specific failure-determinant model estimated. Thus the estimations
suggest that financial development might enhance banking stability.
What effects may have banking system features on banking fragility? The estimations in
the previous tables suggest that the indicators have differentiated effects on the likelihood
of banking crises. Specifically the size of the banking sector seems to increase it and
banking credit activity seems to reduce it. In all cases, the estimations are consistent and
significant. The evidence also suggests that banking concentration might increase banking
fragility. However, in none of the estimated models such variable is significant. Here we
should point out that some of these findings are counterintuitive.
We support our results with statistical tests. Specifically, we support the adequacy of the
estimated failure-determinant models with likelihood-ratio tests [See Tables 3 and 4]. In
all cases, such test rejects the null hypothesis that all the parameters of the models are
zero. Furthermore, according to comparisons of the log-likelihood indicators, the
aggregate models may be the ones that best describe the individual effects of financial
structure and development. This finding may not be surprising. However, we should
emphasise that, by the moment, we cannot reject the possibility of omitted variable bias.
18
21. 6. Econometric assessment of the joint effects of financial structure and development
determinants
Here we report the outcomes of the sets of models used to assess the joint effects of the
financial determinants on banking crises. We report the outcomes associated to the four
estimations of the specification defined by equation (3). Furthermore we report the
outcomes of the tests of omitted variable bias. Such outcomes will allow us to analyse the
pertinence of the study of both, financial structure and development, jointly. Again, in all
the regressions we have included the banking indicators as control variables and the
lagged financial indicators as independent ones.
The third set of failure-determinants models focuses on the joint effects of the financial
determinants on fragility. We summarise their results in Table 5.
19
22. Table 5. Financial Structure, Financial Development and Banking Crises
( FSD specification)
Model Aggregate Activity Size Efficiency
Regression Indicators
Structure Aggregate -3.31*** - - -
(lagged) (-4.55)
Structure Activity - -2.16*** - -
(lagged) (-3.97)
Structure Size - - -2.26*** -
(lagged) (-3.89)
Structure Efficiency - - - -1.05***
(lagged) (-3.27)
Finance Aggregate 3.64*** - - -
(lagged) (3.40)
Finance Activity - 1.65*** - -
(lagged) (2.94)
Finance Size - - 1.60*** -
(lagged) (2.84)
Finance Efficiency - - - 0.23
(lagged) (0.76)
Banking Activity -7.58*** -7.71*** -7.81*** -3.90***
(-4.95) (-5.27) (-5.37) (-3.52)
Banking Size 4.64*** 5.54*** 5.84*** 5.02***
(3.39) (4.24) (4.33) (3.88)
Banking 1.38 0.73 1.20 1.06
Concentration (1.33) (0.97) (1.47) (1.21)
Observations 339 431 411 371
LR-CHI2(5) 81.12*** 73.38*** 64.71*** 69.39***
Prob > chi2 0.000 0.000 0.000 0.000
Log Likelihood -112.86 -153.80 -151.07 -129.13
Notes: The dependent variable is the banking crisis dummy. The z statistics are given in parenthesis and
are based on IRLS variance estimators. One, two and three asterisks indicate significance levels of 10, 5
and 1 percent respectively.
Table 5 shows that the likelihood of banking crises is inversely associated to the levels of
the financial structure indicators and directly associated to the ones of financial
development. All the determinants are statistically significant (1 percent significance
level). The consistency of the estimated associations holds independently of the failure-
determinant model estimated. Financial structure and development, both, matter to
20
23. explain banking stability. Thus the evidence suggests that in market-based and
underdeveloped financial systems the likelihood of banking crises is reduced.
We should point out that these findings seem to contradict the ones of the previous
section regarding the individual effects of financial development. Furthermore, they are
counter-intuitive. It seems plausible to believe that this may occur due to a bias associated
to the econometric specification of the models. We evaluate this possibility by using tests
for omitted variables [See Table 6]. Such tests reject the null hypothesis of irrelevant
variables in the unrestricted models. Thus according to our tests, we should analyse
jointly the effects of financial structure and financial development.
Table 6. Analysis of Specification Bias
( Omitted Variable Tests)
Model Aggregate Activity Size Efficiency
Log Likelihood
FS specification 119.92 158.77 155.68 129.43
FD specification 127.01 163.41 160.53 135.18
FSD specification 112.86 153.8 151.07 129.13
Omitted-Variables Likelihood Ratio (Unrestricted: FSD specification)
LR-CHI2(1) 14.12*** 9.94*** 9.22*** 0.60***
(FS specification)
LR-CHI2(1) 28.30*** 19.22*** 18.92*** 12.10***
(FD specification)
Notes: We consider the financial-structure-and-development specification models as unrestricted and
the financial-development and the financial-structure specification models as the restricted ones. One,
two and three asterisks indicate significance levels of 10, 5 and 1 percent respectively.
The necessity to jointly analyse the determinants of banking crises make us to re-examine
the conclusions obtained in the previous section. Such conclusions may be consistent with
21
24. the latter evidence if the financial development indicators are highly correlated with the
financial structure ones; in other words, if there is multicollinearity between them. Fixed-
effects (within) regressions confirm this intuition [See Appendix A]. Thus, the hidden
fragility-enhancing effects of financial development can be unveiled only when we
account for the degree to which a financial system is based on intermediaries or markets.
Here we need to recall that multicollinearity is a sample phenomenon. A traditional
procedure used to deal with it is to drop a variable in order to fit a regression. However
we do not follow this practice to explain the likelihood of banking crises because of the
results of the tests of omitted-variable bias. Indeed, t it is worthy to recall that the
consequences of the specification bias introduced by omitting a financial indicator may be
worse than the ones introduced by multicollinearity.15 Notice that omitted-variable bias
induces the estimation of biased and inconsistent β estimators among other consequences.
We summarise by indicating that the evidence suggests that the financial structure and
development matter to assess the stability of banking systems. Particularly the
assessments suggest that banking stability is enhanced in economies with market-based
financial systems. Financial development reduces it. However this fragility-enhancing
effect can be unveiled only when we account for financial structure. Thus, financial
structure and development jointly matter. Furthermore the size of the banking sector
seems to reduce banking stability and its lending activity seems to enhance it.
22
25. 7. Summary and discussion
The issue of how financial systems affect the likelihood of banking crises is not well
understood. Such understanding may be essential to avoid banking crises and their
associated costs. Here we have shown the results of an investigation developed to study
such issue with data for 211 countries during the period 1990-2003. Our investigation
uses on fixed-effects logit models for panel-data and likelihood tests to analyse such
issue. We have aimed at clarifying the individual and joint effects of financial structure
and development by controlling for the effects of certain banking system features.
Our main research finding suggests that the financial structure and financial development
jointly matter to assess the stability of banking systems. Particularly the assessments
imply that banking stability is enhanced in economies with market-based financial
systems. Financial development reduces it. However this fragility-enhancing effect can
be unveiled only when we account for financial structure. Furthermore, our findings show
that the size of the banking sector seems to reduce banking stability and its lending
activity seems to enhance it.
Our study leads us to some interesting implications: The first one is that the hypothesis
that financial structure does not have independent effects on banking performances
deserves to be re-examined again.16 According to our findings, financial structure seems
15
Statistically, the worst consequence of multicollinearity relates to the sensitivity of the β estimators and
their standard errors to small changes in data. Thus the coefficients may not be estimated with great
precision and accuracy.
16
Demirguc-Kunt and Huizinga, (2001), conclude that financial structure per se appears to have no effects
on bank margins, neither on bank profitability after controlling for both, bank and market development. The
idea about the irrelevance of financial structure has support on studies that have focused on the determinants
23
26. to affect the likelihood of banking crises. However, we must recognise that the scope of
the financial indicators used in our study is a very narrow one. Legal and regulatory
regimes, financial and monetary institutions also shape intermediation activities. We have
not considered them into our investigation due to the lack of available data.
We believe that further studies on the relationship between financial structure and
banking fragility should focus on these institutional features of the financial systems.
Lender-of-last-resort activities, deposit insurance schemes and solvency regulations may
change the behaviour of banks and the likelihood of banking crises. Currently, most of the
discussions about how to avoid and manage crises deal with the institutional features that
regulatory regimes should adopt. These discussions are particularly relevant in the context
of institutions that can operate not only in a domestic, but also on a global scale.
The second implication of our study relates to the fragility enhancing effects of financial
development. These effects are particularly well-known in developing economies.
Financial development, termed as liberalisation, frequently leads to financial crises in
such economies [See Diaz-Alejandro (1985)]. This consideration and our previous results,
make us believe that regulation must play an in-advance role there. Concretely, we think
that regulations and supervised market-based oriented reforms should precede financial
liberalisation in order to enhance banking stability.17
of economic growth and investment. [See Levine (2002) and Ndikumana (2005), respectively]. Among
these studies, the panel-data study of Loayza and Ranciere (2006), views financial fragility and economic
growth, as the short and long-term consequences of financial development.
17
This statement is controversial. Usually development economists propose bank-based reforms to
encourage financial and economic development [See Fry (1995)]. Among other arguments, they point out
that banks are “better at mobilising savings, identifying good investments and exerting sound corporate
control” [Levine (2002: 398)].
24
27. However, this recommendation may not be implementable everywhere. Particularly, in
developed economies, it may be unfeasible. Usually financial innovation arises there to
avoid financial regulations [Cecchetti (2008)]. Nevertheless, this situation does not imply
that there are not opportunities to enhance stability. Indeed the global financial crises that
we are currently experiencing (2007-2008), may contribute to enhance financial stability.
As we have mentioned, we cannot dismiss the possibility of bidirectional effects between
financial development and banking crises.
We believe that further studies on the joint impact of financial structure and development
may be necessary to clarify and evaluate the statements indicated above. It is our belief
that such studies will reveal us further insights that may contribute to improve our
understanding of the contracting process and of the functioning of intermediaries and
markets. Particularly we think that regulatory issues may be the most fruitful ones.
Hopefully, results based on these investigations may have some relevance for enhancing
the stability and performance of banking systems.
25
28. APPE DIX A
Here we include the outcomes of the fixed-effects panel-data models that assess the
relationships among the financial indicators. The regressions include constant terms to
eliminate constant effects.
Table A.1 Financial Structure and Financial Development
Fixed-Effects (within) Regressions
Regressor/Regressed Variables
Structure Structure Structure Structure
Aggregate Activity Size Efficiency
Regression Indicators
Finance Aggregate 1.12*** - - -
(52.22)
Finance Activity - 0.80*** - -
(79.44)
Finance Size - - 0.63*** -
(48.37)
Finance Efficiency - - - 0.86***
(61.62)
Constant 0.00 1.10*** 1.00*** -6.71***
(0.38) (23.89) (27.84) (-450.11)
Observations 990 1408 1376 1120
F 2726.87*** 6310.95*** 2339.85*** 3796.83***
R2 within 0.75 0.82 0.64 0.78
R2 between 0.62 0.65 0.29 0.80
R2 overall 0.61 0.70 0.35 0.77
Corr(ui,Xb) -0.58 -0.55 -0.61 -0.39
σu 1.19 1.29 1.09 0.98
σe 0.39 0.55 0.47 0.47
ρ 0.90 0.84 0.84 0.81
F (Ho: ui=0) 52.98*** 40.63*** 37-13*** 36.88***
Notes: The t statistics are given in parenthesis. One, two and three asterisks indicate significance levels
of 10, 5 and 1 percent respectively.
Table A.1, shows that the financial structure indicators are positively and highly
correlated to the financial development ones. All the associations are positive and
statistically significant (1 percent significance level). The economic interpretation of
these results is that developed financial systems are associated to market-based ones.
26
29. APE DIX B
Table B.1 Recognised Banking Crises per Country
(1980-2003)
umber Country Years umber Country Years
1 Aruba - 22 Bahrain -
2 Andorra - 23 Bahamas, The -
3 Afghanistan - 24 Bosnia and Herzegovina 1992-2003
4 Angola 1991-2003 25 Belarus 1995-2003
5 Anguilla - 26 Belize -
6 Albania 1992 27 Bermuda -
7 Netherlands Antilles - 28 Bolivia 1986-1988, 1994-2003
8 United Arab Emirates - 29 Brazil 1990, 1994-1999
9 Argentina 1980-1982, 1989-1990, 1995- 30 Barbados -
1997, 2001-2003
10 Armenia 1994-1996 31 Brunei 1983-1987
11 American Samoa - 32 Bhutan -
12 Antigua and Barbuda - 33 Botswana 1994-1995
13 Australia 1989-1992 34 Central African Republic 1976-1992
14 Austria - 35 Canada 1983-1985,
15 Azerbaijan 1995 36 Switzerland -
16 Burundi 1994-2003 37 Channel Islands -
17 Belgium - 38 Chile 1976, 1981-1986,
18 Benin 1988-1990 39 China 1990-1999
19 Burkina Faso 1988-1994 40 Cote d'Ivoire 1998, 1989-1991
20 Bangladesh 1986-1996 41 Cameroon 1987-1993, 1995-1998
21 Bulgaria 1995-1997 42 Congo, Rep. 1992-2003
Notes: 1) Financial structure and development data are extracted from the database of Beck, Demirguc-Kunt and Levine, (2006). 2)
Data on banking crises are extracted from the datasets of Caprio and Klingebiel, (2003).
27
30. Table B.1 Recognised Banking Crises per Country
(1980-2003)
(Continued)
umber Country Years umber Country Years
43 Colombia 1982-1987 65 France 1994, 1995
44 Comoros - 66 Faeroe Islands -
45 Cape Verde 1993-2003 67 Micronesia, Fed. Sts. -
46 Costa Rica 1987-2003 68 Gabon 1995-2003
47 Cuba - 69 United Kingdom 1974-1976, 1980-1999,
48 Cayman Islands - 70 Georgia 1991
49 Cyprus - 71 Ghana 1982-1989, 1997-2003
50 Czech Republic 1989-2003 72 Guinea 1985, 1993-1994
51 Germany 1976, 1978-1980 73 Gambia, The 1985-1992
52 Djibouti 1991-1993 74 Guinea-Bissau 1995-2003
53 Dominica - 75 Equatorial Guinea 1983-1985
Denmark 1987, 1988, 1989, 1990, 1991, Greece 1991-1995
54 1992 76
55 Dominican Republic - 77 Grenada -
56 Algeria 1990-1992 78 Greenland -
57 Ecuador 1980-1984, 1996-2003 79 Guatemala -
58 Egypt, Arab Rep. 1980-1985, 1991-1995M 80 Guam -
59 Eritrea 1993 81 Guyana -
60 Spain 1977-1985 82 Hong Kong, China 1982-1986, 1998
61 Estonia 1992-1995, 1998 83 Honduras -
62 Ethiopia 1994, 1995, 84 Croatia 1996
63 Finland 1991, 1992, 1994, 1995 85 Haiti -
64 Fiji - 86 Hungary 1991-1995
Notes: 1) Financial structure and development data are extracted from the database of Beck, Demirguc-Kunt and Levine, (2006). 2)
Data on banking crises are extracted from the datasets of Caprio and Klingebiel, (2003).
28
31. Table B.1 Recognised Banking Crises per Country
(1980-2003)
(Continued)
umber Country Years umber Country Years
87 Indonesia 1994, 1997-2003 109 Liberia 1991-1995
88 Isle of Man - 110 Libya -
89 India 1993-2003 111 St. Lucia -
90 Ireland - 112 Liechtenstein -
91 Iran, Islamic Rep. - 113 Sri Lanka 1989-1993
92 Iraq - 114 Lesotho 1988-2003
93 Iceland 1985, 1986, 1993, 115 Lithuania 1995-1996
94 Israel 1977-1983 116 Luxembourg -
95 Italy 1990-1995 117 Latvia 1995-2003
96 Jamaica 1994-2000 118 Macao, China -
97 Jordan 1989, 1990 119 Morocco 1980-1985
98 Japan 1991-2003 120 Monaco -
99 Kazakhstan - 121 Moldova -
100 Kenya 1985-1989, 1992-2003 122 Madagascar -
101 Kyrgyz Republic 1990-1999 123 Maldives -
102 Cambodia - 124 Mexico 1981-1991, 1994-1997
103 Kiribati - 125 Marshall Islands -
104 St. Kitts and Nevis - 126 Macedonia, FYR 1993-1994
105 Korea, Rep. 1997-2003 127 Mali 1987-1989
106 Kuwait 1980-1989 128 Malta -
107 Lao PDR 1990-1995 129 Myanmar 1996-2003
108 Lebanon - 130 Mongolia -
Notes: 1) Financial structure and development data are extracted from the database of Beck, Demirguc-Kunt and Levine, (2006). 2)
Data on banking crises are extracted from the datasets of Caprio and Klingebiel, (2003).
29
32. Table B.1 Recognised Banking Crises per Country
(1980-2003)
(Continued)
umber Country Years umber Country Years
131 Northern Mariana Islands - 153 Palau -
132 Mozambique 1987-1995 154 Papua New Guinea 1989-2003
133 Mauritania 1984-1993 155 Poland 1990-1999
134 Montserrat - 156 Puerto Rico -
135 Mauritius 1996 157 Korea, Dem. Rep. -
136 Malawi - 158 Portugal -
137 Malaysia 1985-1988, 1997-2003 159 Paraguay 1995-1999, 2001
138 Mayotte - 160 French Polynesia -
139 Namibia - 161 Qatar -
140 New Caledonia - 162 Romania 1990-2003
141 Niger 1983-2003 163 Russian Federation 1995-2003
142 Nigeria 1990-1999 164 Rwanda 1991-2003
143 Nicaragua 1986-1996 165 Saudi Arabia -
144 Netherlands - 166 Sudan -
145 Norway 1987-1993 167 Senegal 1988-1991
146 Nepal 1988 168 Singapore 1982
147 New Zealand 1987-1990 169 Solomon Islands -
148 Oman - 170 Sierra Leone 1990-2003
149 Pakistan - 171 El Salvador 1989
150 Panama 1988-1989 172 San Marino -
151 Peru 1983-1990 173 Somalia -
152 Philippines 1981-1987, 1998-2003 174 Sao Tome and Principe 1980-1999
Notes: 1) Financial structure and development data are extracted from the database of Beck, Demirguc-Kunt and Levine, (2006). 2)
Data on banking crises are extracted from the datasets of Caprio and Klingebiel, (2003).
30
33. Table B.1 Recognised Banking Crises per Country
(1980-2003)
(Continued)
umber Country Years umber Country Years
175 Suriname - 194 Uganda 1994-2003
176 Slovak Republic 1991-2003 195 Ukraine 1997-1998
177 Slovenia 1992-1994 196 Uruguay 1981-1984, 2002-2003
178 Sweden 1991-1994 197 United States 1984-1991
179 Swaziland 1995 198 Uzbekistan -
180 Seychelles - 199 St. Vincent and the Grenadines -
181 Syrian Arab Republic - 200 Venezuela 1975-1989, 1994-1995
182 Chad 1980-1989, 1992 201 Virgin Islands -
183 Togo 1993-1995 202 Vietnam 1997-2003
184 Thailand 1983-1987, 1997-2003 203 Vanuatu -
185 Tajikistan 1996 204 West Bank and Gaza -
186 Turkmenistan - 205 Samoa -
187 Timor-Leste - 206 Yemen, Rep. 1996-2003
188 Tonga - 207 Serbia and Montenegro -
189 Trinidad and Tobago 1982-1993 208 South Africa 1977, 1989-2003
Tunisia 1991-1995 Congo, Dem. Rep. 1980-1989, 1991-1992,
190 209 1994-2003
191 Turkey 1982-1985, 1994, 2000-2003 210 Zambia 1995
192 Taiwan, China 1983-1984, 1995, 1998 211 Zimbabwe 1995-2003
193 Tanzania 1986-1999
Notes: 1) Financial structure and development data are extracted from the database of Beck, Demirguc-Kunt and Levine, (2006). 2)
Data on banking crises are extracted from the datasets of Caprio and Klingebiel, (2003).
31
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