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The Anatomy of Banking Crises
Author:
Rupa Duttagupta null

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Mr. Paul Cashin
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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 093
Language:
English
Publication Date:
01 Apr 2008
DOI:
https://doi.org/10.5089/9781451869545.001
ISBN:
9781451869545
ISSN:
1018-5941
Pages:
37
Keywords:
WP; banking crisis; liability dollarization; banking crises By Year; banking crises with a binary classification tree
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper uses a Binary Classification Tree (BCT) model to analyze banking crises in 50 emerging market and developing countries during 1990-2005. The BCT identifies key indicators and their threshold values at which vulnerability to banking crisis increases. The three conditions identified as crisis-prone-(i) very high inflation, (ii) highly dollarized bank deposits combined with nominal depreciation or low liquidity, and (iii) low bank profitability-highlight that foreign currency risk, poor financial soundness, and macroeconomic instability are key vulnerabilities triggering banking crises. The main results survive under alternative robustness checks, confirming the importance of the BCT approach for monitoring banking system vulnerabilities.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund