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Origins of banking crises revisited: evidence from developed and developing countries

Origins of banking crises revisited: evidence from developed and developing countries This paper revisits the causes of the 2008 global financial crisis. It focuses on the causes of the crisis, ignoring cross-country contagion effects. The study uses an assortment of financial, regulatory and macroeconomic variables to estimate a logit econometric model for a large sample of developed and developing countries. Findings indicate that lower bank liquidity, higher inflation rates, greater credits to the private sector are all correlated with an increased risk of banking sector problems. In addition, results stress the role of microeconomic variables in explaining the 2008 banking and financial crisis. Surprisingly, results prove that good regulatory practices are likely to enhance the probability of banking crisis, which contradicts the theory prediction. This positive finding makes us skeptical about the role of regulation in promoting banks' stability during the 2008 financial crisis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Business and Systems Research Inderscience Publishers

Origins of banking crises revisited: evidence from developed and developing countries

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Publisher
Inderscience Publishers
Copyright
Copyright © Inderscience Enterprises Ltd
ISSN
1751-200X
eISSN
1751-2018
DOI
10.1504/IJBSR.2021.117269
Publisher site
See Article on Publisher Site

Abstract

This paper revisits the causes of the 2008 global financial crisis. It focuses on the causes of the crisis, ignoring cross-country contagion effects. The study uses an assortment of financial, regulatory and macroeconomic variables to estimate a logit econometric model for a large sample of developed and developing countries. Findings indicate that lower bank liquidity, higher inflation rates, greater credits to the private sector are all correlated with an increased risk of banking sector problems. In addition, results stress the role of microeconomic variables in explaining the 2008 banking and financial crisis. Surprisingly, results prove that good regulatory practices are likely to enhance the probability of banking crisis, which contradicts the theory prediction. This positive finding makes us skeptical about the role of regulation in promoting banks' stability during the 2008 financial crisis.

Journal

International Journal of Business and Systems ResearchInderscience Publishers

Published: Jan 1, 2021

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