Banking Crises and Exchange Rate Regimes : Is There a Link?

The authors investigate the links between banking crises, and exchange rate regimes, using a comprehensive data set that includes developed, and developing countries over the last two decades. In particular, they examine whether the choice of exchange rate regime affects the likelihood, cost, and duration of banking crises. Empirical results indicate that adopting a fixed exchange rate, diminishes the likelihood of a banking crisis in developing countries. But once a banking crisis occurs, its real costs - in terms of forgone output growth - are higher for countries with more stringent exchange rate requirements. The duration of crises seems not to be affected by exchange rate policy. Instead, it is influenced mainly by the size of the credit boom before the crisis.

Bibliographic Details

Main Authors:	Domac, Ilker, Martinez Peria, Maria Soledad
Language:	English en_US
Published:	World Bank, Washington, DC 2000-11
Subjects:	ADVERSE EFFECTS, AGGREGATE DEMAND, BALANCE SHEET, BANK ASSETS, BANKING CRISES, BANKING CRISIS, BASKET OF CURRENCIES, BLANKET GUARANTEES, CAPITAL ACCOUNT, CAPITAL FLOWS, CAPITAL INFLOWS, CENTRAL BANK, COMPETITIVENESS, CONTRACT ENFORCEMENT, CRAWLING PEGS, CURRENCY CRISES, CURRENCY MISMATCH, CURRENCY OF DENOMINATION, CURRENCY REGIME, DEBT, DEPOSIT FREEZES, DEPOSIT INSURANCE, DEPOSITS, DEVELOPING COUNTRIES, DOLLAR DEPOSITS, DOMESTIC CREDIT, DOMESTIC CURRENCY, DOMESTIC DEPOSITORS, DOMESTIC RESIDENTS, EMPIRICAL EVIDENCE, EXCHANGE RATE, EXCHANGE RATE ARRANGEMENTS, EXCHANGE RATE CHANGES, EXCHANGE RATE FLEXIBILITY, EXCHANGE RATE PEGS, EXCHANGE RATE POLICIES, EXCHANGE RATE POLICY, EXCHANGE RATE REGIME, EXCHANGE RATE REGIMES, EXCHANGE RATE RISK, EXCHANGE RATE STABILITY, EXCHANGE RATES, EXPECTED RETURNS, EXTERNAL SHOCK, EXTERNAL SHOCKS, FINANCIAL CRISES, FINANCIAL INSTABILITY, FINANCIAL LIBERALIZATION, FINANCIAL MARKETS, FINANCIAL SECTORS, FINANCIAL STABILITY, FINANCIAL SYSTEMS, FISCAL COST, FISCAL POLICY, FIXED EXCHANGE RATE, FIXED EXCHANGE RATES, FLEXIBLE EXCHANGE RATE, FLEXIBLE EXCHANGE RATE SYSTEMS, FLEXIBLE EXCHANGE RATES, FLOATING EXCHANGE RATE, FLOATING EXCHANGE RATES, FOREIGN ASSETS, FOREIGN CURRENCY, FOREIGN EXCHANGE, FOREIGN EXCHANGE RESERVES, FOREIGN INTEREST RATES, GDP, GDP PER CAPITA, GOVERNMENT GUARANTEES, GROWTH RATE, HIGH INFLATION, INDEXATION, INFLATION RATE, INTERMEDIATE REGIMES, INTERNATIONAL MARKETS, LIQUIDITY, LIQUIDITY SUPPORT, LOANABLE FUNDS, LOCAL CURRENCY, M2, MACROECONOMIC CONDITIONS, MACROECONOMIC FACTORS, MACROECONOMIC MANAGEMENT, MACROECONOMIC PERFORMANCE, MACROECONOMIC VARIABLES, MONETARY AGGREGATES, MONETARY POLICY, MORAL HAZARD, NATIONALIZATION OF BANKS, NOMINAL DEVALUATION, NOMINAL EXCHANGE RATE, NOMINAL INTEREST RATES, OUTPUT COST, OUTPUT GROWTH, OUTPUT VOLATILITY, PEGS, POLICY RESEARCH, POVERTY REDUCTION, PRIVATE DOMESTIC, PRIVATE DOMESTIC CREDIT, PRIVATE SECTOR, REAL EXCHANGE, REAL EXCHANGE RATE, REAL EXCHANGE RATE VOLATILITY, REAL GDP, REAL GROWTH, REAL INTEREST, REAL INTEREST RATE, REAL INTEREST RATES, REAL OUTPUT, RESERVES, SHORT-TERM INTEREST RATES, TERMS OF TRADE,
Online Access:	http://documents.worldbank.org/curated/en/2000/11/748726/banking-crises-exchange-rate-regimes-link https://hdl.handle.net/10986/19778
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