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IMF
Staff Papers Logo    March 1998
Volume 45, Number 1
 
The Determinants of Banking Crises in Developing and Developed Countries
By Asli Demirguc-Kunt and Enrica Detragiache

Full Text of This Article (PDF 1,892 K)

Abstract: This paper studies the factors associated with the emergence of systemic banking crises in a large sample of developed and developing countries in 1980-94 using a multivariate logit econometric model. The results suggest that crises tend to erupt when the macroeconomic environment is weak, particularly when growth is low and inflation is high. Also, high real interest rates are clearly associated with systemic banking sector problems, and there is some evidence that vulnerability to balance of payments crises has played a role. Countries with an explicit deposit insurance scheme were particularly at risk, as were countries with weak law enforcement. [JEL E44,G21]

1998 International Monetary Fund