The Determinants of Banking Crisis Losses

Akbar Mousavi, Seyed Saleh; Salmani, Behzad

doi:10.22054/ijer.2022.63191.1032

Document Type : Research Paper

Authors

¹ PhD in Economics, Faculty of Economics and Management, University of Tabriz, Tabriz , Iran

² Professor, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran

https://doi.org/10.22054/ijer.2022.63191.1032

Abstract

The main purpose of this study is to identify the determinants of banking crisis losses for 49 sample countries over the period 1980-2019. In this regard, two sub-purposes are pursued. In the first preliminary step, we identify and date episodes of banking crises for 49 countries. The graphical analysis of crises showed that about half of the crises were occurred between 2008-2012 in which the share of high-income countries was higher than other country groups. Then, in the second preliminary step, we used the Hodrick-Prescott filter to extract different trends from countries' GDPs to calculate four alternative measures of real output losses. The investigated output losses showed that Angola and Greece had the highest and lowest losses among the four types of losses, respectively. Finally, to achieve the main purpose, we use the Poisson quasi-maximum likelihood (PPML) method to estimate model. The model was estimated without and with currency crisis variable. Our findings show the occurrence of a currency crisis is effective in intensifying output losses following banking crises. Also, the variables of inflation, bank credit to GDP, credit-to-GDP gap, public debt/GDP, with a positive effect and variables of financial openness, discretionary government spending and central bank assets with a negative impact, are important factors in output losses of banking crisis. Therefore, we recommend that the mentioned variables be considered in banking crisis management.

Keywords

20.1001.1.17260728.1401.27.92.1.3

Main Subjects

Monetary economy

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The Determinants of Banking Crisis Losses

References

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Volume 27, Issue 92 - Serial Number 92October 2022Pages 9-43

Volume 27, Issue 92 - Serial Number 92
October 2022
Pages 9-43