The Anatomy of Banking Crises

Author/Editor:

Rupa Duttagupta ; Paul Cashin

Publication Date:

April 1, 2008

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 08/93

Subject:

English

Publication Date:

April 1, 2008

ISBN/ISSN:

9781451869545/1018-5941

Stock No:

WPIEA2008093

Format:

Paper

Pages:

37

Please address any questions about this title to publications@imf.org