Third, more concentrated banking systems significantly increase the probability of a systemic bank shock. We demonstrate that disentangling these effects is crucial to understanding the determinants of bank fragility and those of the policy responses to banking distress. In the aftermath of the Asian financial crisis, many blamed international institutions, corruption, governments, and flawed macro and microeconomic policies not only for causing the crisis but also unnecessarily lengthening and deepening it. The standard model of strategic tax competition assumes that government policymakers are perfectly benevolent. With regard to deposit insurance, the results we obtain with bank-level data mirror those obtained with country level data. One seemingly important piece of evidence in the debate has been the empirical finding that more competition leads to a higher probability of banking crisis arrival. This paper documents trends in bank activity, consolidation, internationalization, and financial firm conglomeration with data on more than 100 countries, and explores the extent to which financial firm risk and systemic risk potential in banking are related to consolidation and conglomeration.
Caprio, Gerard, Daniela Klingebiel, Luc Laeven and Guillermo Noguera, 2005, Banking Crises Database, in Systemic Financial Crises, P. Otra similitud importante es la forma en V invertida adoptada por la curva de crecimiento de la producción en Estados Unidos, a medida que la economía se enfriaba en vísperas de la crisis. In addition, we can employ better measures of some determinants of bank fragility, such as bank market structure, since these variables can now be constructed as time series and not as period averages. This seems an unsurprising finding in light of the stronger commitment of governments to intervene in the presence of explicit deposit guarantees. This classification seems to be considered the most complete to date, and has been already used in recent empirical work see e.
The slope of this function is a random variable, to be described below, whose realization is observed at date t. Por otro lado, la trayectoria de su déficit en cuenta corriente es peor que el promedio. To close, we believe that many empirical results of a large literature need to be reinterpreted and the role of some cross-country determinants of bank fragility need to be reassessed. We consider two versions of each indicator. The use of these models to provide early warnings for crises is also reviewed, as are studies of the economic effects of banking crises and of the policies to forestall them. As pointed out by Allen and Gale 2007 , however, the empirical literature on bank fragility has mainly focused on documenting empirical regularities. We re-examine the separate impact of macroeconomic factors, bank market structure, deposit insurance, and external shocks on the probability of a systemic bank shocks and on the probability of government.
Similarly, as competition increases, the probability of bank failure can either increase or decrease. It would be relatively easy to augment the current model with this feature, for example, by assuming that the shock to the loan portfolio involves just not all banks, but a fraction of them. Here we consider four systematic and generally comprehensive classifications well known in the literature and widely used in empirical work. The model predicts that as competition increases, both loans and assets increase; however, the effect on the loans-to-assets ratio is ambiguous. We believe that many findings of a large empirical literature need to be re-assessed.
We have selectively chosen a few studies, but the issues we raise would be relevant to much work besides the studies we have singled out for attention. Each bank chooses deposits, loans, and bond holdings b so as to maximize expected profits, given the choices of other banks. Disentangling the separate effects of systemic bank shocks and government responses turns out to be crucial in understanding the roots of banking fragility. Disentangling the effects of systemic bank shocks and government responses turns out to be crucial inunderstanding the roots of bank fragility. In this sense, this paper aimed to compare the performance of several currency and banking crisis indicators within the Turkish economy which underwent severe fiancial crises in the last twenty years.
Campaign contributions may affect tax competition and enhance or retard the mobility of capital across jurisdictions. We show that partial tax coordination is more likely to prevail if the number of regions in a coalition subgroup is smaller and the number of existing regions in the entire economy is larger. Should governments and international institutions intervene? Remarkably, with this finer data set and richer statistical specification all earlier main results are confirmed. We explore these predictions empirically using a cross-sectional sample of 2,500 U. As it is difficult to monitor movements of several indicators individually, that too pertaining to different sectors, while predicting crises, an attempt is also made to construct three composite indices, viz.
Or they might not react at all if implicit or explicit guarantees on deposits are in place. The deposit insurer bails out the banks when they fail. There is some evidence that changes in terms of trade totch , financial openness finopen , and the flexibility of exchange rate arrangements erclassrr have a significant impact on the probability of a systemic bank shock, although the coefficients associated with the relevant variables are not always statistically significant. Our sample mean and median output loss estimates are also big. We document that credit booms start with an increase in productivity growth, which subsequently falls faster during bad booms. What can be done to lessen their impact? In both loan and deposit markets banks are symmetric Cournot-Nash competitors. The economic importance of these differences is illustrated next.
Understanding bank fragility and the identification of policies capable of reducing its potential welfare costs is still a field in its infancy. Key macroeconomic, structural, and institutional features of economies have effects on the likelihood of a government response that are totally different from their effects on the likelihood of a banking crisis. . This study investigates the real output losses associated with modern banking crises. This is because, as we find, that the probability of a systemic bank shock does not depend on whether a deposit insurance system is in place.
At the same time, we find a positive and significant relationship between bank concentration and the probability of a systemic bank shock. A more realistic assumption would be that some banks fail and some do not. Beck, Thorsten, Asli Demirgüç-Kunt and Ross Levine, 2006, Bank Competition, Concentration and Crises: First Results, Journal of Banking and Finance, Volume 30, 1581-1603. In 1993 Norway introduced a paternity quota of the paid parental leave. Smith, 2004, Deposit Insurance and Bank Regulation in a Monetary Economy: A General Equilibrium Exposition, Economic Theory, Vol. Explicit deposit insurance tends to be detrimental to bank stability - the more so where bank interest rates are deregulated and the institutional environment is weak. This paper analyzes the management of surges in capital inflows to Emerging Markets.
It is commonly argued that poorly designed banking system safety nets are largely to blame for the frequency and severity of modern banking crises. Smith, 2002, Deposit Insurance: A Reconsideration, Journal of Monetary Economics, 49, 6:1235-1260. De Nicolò, Honohan and Ize 2005 find that dollarization is positively associated with bank fragility using a theory-based indicator of systemic bank shock, the Z-score of large banks, as well as measures of aggregate non-performing loans. ¿O resultará ser similar a los episodios más leves, en los que la recuperación fue relativamente rápida? Note that these properties hold under any market structure, that is, for any value of N. Based on ten years of research, the authors develop a theoretical approach to analyzing financial crises.