## The Impact of Conflict and Political Instability on Banking Crises in Developing Countries

_IMF Working Papers, February 28, 2020_

## Source details

**Canonical URL:** [The Impact of Conflict and Political Instability on Banking Crises in Developing Countries](https://www.imf.org/en/publications/wp/issues/2020/02/28/the-impact-of-conflict-and-political-instability-on-banking-crises-in-developing-countries-49047)

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## Bibliographic details
- Authors: Ali Compaoré, Montfort Mlachila, Rasmané Ouedraogo, Sandrine Sourouema
- Published: February 28, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513530055.001

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### Summary findings
- Conflicts and political instability are associated with higher probability of systemic banking crises.
- The duration of a conflict is positively associated with rising probability of a banking crisis.
- Conflicts and political instability in one country can have negative spillover effects on neighboring countries’ banking systems.
- The primary channel of transmission from conflict or political instability to banking crises is the occurrence of fiscal crises following a conflict or political instability.

### Analysis and methodology (as described)
- The paper investigates whether rising conflict and political instability globally over the past several decades led to increased occurrence of banking crises in developing countries.
- Empirical approach draws on econometric analysis using Logit models to examine the occurrence of a banking crisis and systemic crises indicators.
- Focus includes banking liquidity shortage, banking turmoil, and interactions with terms of trade and international trade.

### Subject areas and keywords
- Subject: Banking, Banking crises, Commercial banks, Econometric analysis, Financial crises, Financial institutions, International trade, Logit models, Systemic crises, Terms of trade
- Keywords: banking crises; banking crises in year; banking crisis; banking liquidity shortage; banking turmoil; Commercial banks; conflict; countries matter; economic growth; experiencing banking crisis; fiscal crises; fiscal crisis; Global; government crisis; liquidity shortage; Logit models; occurrence of a banking crisis; occurrence of banking crisis; political instability; start of a banking crisis; state fragility index; Sub-Saharan Africa; systemic banking crisis; Systemic crises; terms of trade; Terms of trade; WP

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- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2020/02/28/the-impact-of-conflict-and-political-instability-on-banking-crises-in-developing-countries-49047_