By contrast, the existence or the absence of an explicit deposit insurance system does not have a significant impact on the probability of a systemic bank shock Again, all previous results are confirmed with the bank-level dataset. The time dependence that emerges from the hazard function is potentially generated by a wide variety of structural and cyclical factors. Throughout history, rich and poor countries alike have been lending, borrowing, crashing--and recovering--their way through an extraordinary range of financial crises. However, these variables do not significantly affect the probability of a government response. You can help correct errors and omissions.
Summary To be sure, banking in the United States has never been fully deregulated. Lindgren, Carl-Johan, Gillian Garcia and Matthew Saal, 1996, Bank Soundness and Macroeconomic Policy, International Monetary Fund, Washington D. We argue that, while intervention has been prompter, the measures taken so far remain less comprehensive and in-depth. For simplicity, we assume that only banks can invest in bonds. Within the group of household-based indicators, the household debt service ratio stands out. Using a panel fixed effects model for a sample of 121 countries covering 1975-2005, we examine how financial development, financial liberalization and banking crises are related to income inequality. We also show that under linear utility, partial tax coordination is more likely to prevail if the preference for a local public good is stronger.
Reinhart, Carmen and Kenneth Rogoff, 2009, This Time Is Different: Eight Centuries of Financial Follies, Princeton University Press, Princeton, New Jersey. I have never been entirely satisfied with how either economists or historians identify and date past U. We also considered exchange rates and current account balances as indicators. The paper contrastsoutput losses across different crises and finds that sovereign debt crises tend tobe more costly than banking crises, and these in turn tend to be more costly thancurrency crises. The comparison of noise-to-signal ratios should not, however, be overemphasised. We test the main predictions of the model and identify the default probability as the main component of measured productivity that lies behind crises. Depositors are paid pro-rata by the banks.
A more realistic assumption would be that some banks fail and some do not. Una pregunta crítica es si la crisis estadounidense resultará ser similar a las más severas crisis de los países industrializados, en cuyo caso el crecimiento podría caer significativamente por debajo de la tendencia durante un período prolongado. Such adverse shocks are for the most part unobservable, but their occurrence results in predictable changes in certain variables that are observable. The former approach tends to maximize the fiscal cost of systemic banking crises, whereas the latter one tends to minimize it. Borrowers pay loans and in turn, banks pay depositors, if possible.
Hence, this classi- fication relies mostly on supervisory sources and government measures undertaken in response to a crisis Boyd et al. It also provides some indication that the use of bank-level data may be more informative in assessing the determinants of bank fragility, as witnessed by the uncovering of a significant impact of the flexibility of exchange rate arrangements on the probability of a systemic bank shock. Barth, James, Gerard Caprio and Ross Levine, 2006, Rethinking Bank Regulation, Cambridge University Press, Cambridge, U. As a result, this literature offers many—often contrasting—findings, which vary considerably in terms of samples used, banking crisis definitions and relevant dating. These differences in results occur not only between specifications within the same sample, but also comparing results of the same regressions between samples.
The standard model of strategic tax competition assumes that government policymakers are perfectly benevolent. We show that when deposit insurance premia are low, the monetization of bank bailout costs may not be more inflationary than financing these costs out of general revenue. More attention should be focused on developing indicators that might predict bank insolvency for individual banks and systems as a whole. Valid formulas for the approximate large-sample variances are given, and their calculation is illustrated using a numerical example. Bordo, 2008 and as related to the specific mechanics of the shock triggering a crisis e.
Finally, currency crises have robust state dependence, but this is not the case for banking crises. We begin with the theoretical foundation of this new method. But one threshold is chosen so as to predict at least two thirds of the crises red , and the other at least 90% amber. All four classifications only agree on 41 dates of crisis. We first compare indicators on a standalone basis and then show the gains in predictive power from combining them.
Thus, they cannot take into account country-specific features. Credit booms are not rare, some end in a crisis bad booms whereas others do not good booms. Even if all suspensions had resulted in failures, which of course did not happen, we still have a failure rate of 0. In a companion paper the authors discuss possible preventatives and the tradeoff between safety and soundness versus efficiency. Confirming what policymakers have long stressed, international debt also contains useful information , last two rows , although on balance not as much as the aggregate and household debt indicators.
Sprague 1910 , and some even add in a few more. The article explores the determinants of banks' capital ratio in the Pre-Regulation Era where capital structure decisions were not influenced by deposit-insurance schemes, capital requirements, or high tax shields. Wide variations around a common policy trend can, however, be observed across countries and sectors. Strictly speaking, one could drop the year that precedes the crisis, on the grounds that by then it would be too late to take major preventive steps. Properly interpreted, these results are not necessarily inconsistent with those reported by Beck et al 2006 , because the dependent variables are completely different.