nr 084 - The Roots of Banking Crises in Emerging Market Economics: A Panel Data Approach

DNB Working Papers
Date 31 January 2006

This paper investigates which leading indicators signal banking crises in emerging economies by using a multivariate logit model. We find that the stability of banking sectors in emerging economies is at risk in an environment of rapid lending growth, high inflation and rising real interest rates. Interestingly, these events also seem to be driven by a flatter US yield curve, the lack of explicit deposit insurance and a fall in FDI inflows. In comparison with the existing literature, the latter factors appear to be distinctive for emerging economies. JEL Codes: E44, G10, C23. Keywords: emerging market economies, banking crises and panel data