The frequency of banking crises in a dynamic setting: a discrete-time duration approach

This paper focuses on descriptive features of banking crises. More than two centuries of banking crises are considered, and a discrete-time duration model is estimated to identify the hazard function characterizing banking crises. The model makes it possible to identify a time-dependence effect in t...

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Bibliographic Details
Published in:Oxford economic papers 2017-10, Vol.69 (4), p.1078-1100
Main Author: Bouvatier, Vincent
Format: Article
Language:English
Subjects:
Banking
Banking industry
Crises
Economic crisis
Economics and Finance
Humanities and Social Sciences
Policy making
Studies
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Summary:This paper focuses on descriptive features of banking crises. More than two centuries of banking crises are considered, and a discrete-time duration model is estimated to identify the hazard function characterizing banking crises. The model makes it possible to identify a time-dependence effect in the occurrence of banking crises. The time dependence that emerges from the hazard function is potentially generated by a wide variety of structural and cyclical factors. In this paper, the hazard function serves a descriptive purpose and provides two insights into the frequency of banking crises. First, it shows the extent to which policymakers failed in muting the exposure to a new banking crisis during the two decades following a banking crisis. Second, it provides quantitative evidence that graduation from banking crises is elusive.
ISSN:0030-7653
1464-3812
DOI:10.1093/oep/gpx019