TY - JOUR
T1 - Causes of banking crises
T2 - Deregulation, credit booms and asset bubbles, then and now
AU - Roy, Saktinil
AU - Kemme, David M.
N1 - Funding Information:
We would like to thank an anonymous referee for many helpful comments. We would also like to thank Paul McNelis who reviewed and commented on an earlier draft. The usual disclaimer applies. Financial support from the Research Centre of Athabasca University is gratefully acknowledged.
PY - 2012/10
Y1 - 2012/10
N2 - We examine similarities in the run-up to banking crises using two criteria for their predictability: i) the percentage of a specified number of years prior to a crisis correctly called; and ii) the percentage of true alarms of total alarms for a crisis. Using panel logit models we find that a banking crisis will be sparked by the collapse of a real asset bubble. While such bubbles are associated with popular stories of a new era and an increasingly deregulated financial system, in most cases, this would occur even in the absence of sustained surges of capital inflow, accumulation of public debt, low interest rate policies, or structural shocks. We also find that an increase in income inequality inflated the recent housing bubble.
AB - We examine similarities in the run-up to banking crises using two criteria for their predictability: i) the percentage of a specified number of years prior to a crisis correctly called; and ii) the percentage of true alarms of total alarms for a crisis. Using panel logit models we find that a banking crisis will be sparked by the collapse of a real asset bubble. While such bubbles are associated with popular stories of a new era and an increasingly deregulated financial system, in most cases, this would occur even in the absence of sustained surges of capital inflow, accumulation of public debt, low interest rate policies, or structural shocks. We also find that an increase in income inequality inflated the recent housing bubble.
KW - Banking crisis
KW - Logit
KW - Similarity
UR - http://www.scopus.com/inward/record.url?scp=84860825602&partnerID=8YFLogxK
U2 - 10.1016/j.iref.2012.04.001
DO - 10.1016/j.iref.2012.04.001
M3 - Journal Article
AN - SCOPUS:84860825602
SN - 1059-0560
VL - 24
SP - 270
EP - 294
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
ER -