216
Views
7
CrossRef citations to date
0
Altmetric
Original Articles

A chronicle of the banking and currency crises

Pages 873-878 | Published online: 22 Aug 2006
 

Abstract

The research undertaken in the area of banking and currency crises is surveyed. The causes and implications of the twin crises are discussed, along with the theoretical and empirical framework for investigating them. The overview has highlighted a number of interesting aspects. A consistent set of economic indicators is identified as being able to predict possible financial jitters. Non-quantified factors such as expectations, herding behaviour and contagion are also crucial beyond and above economic fundamentals. The direction of the twin crises’ causality is not clearly established yet. It is usually a banking crisis that precedes a currency downfall, with the latter creating a vicious spiral. Finally, a few other points are identified as issues of future concern.

Acknowledgements

The author is grateful to Paul Dawson for continuous support. Special thanks are due to Gordon Gemmill, Elena Kalotychou and Neil Tomkin for helpful comments. The usual disclaimer applies.

Notes

 For an excellent discussion on various issues of the sovereign risk faced by multinational banks, the interested reader is referred to Saunders and Cornett (Citation2003) and Heffernan (Citation2004).

 There is a vast amount of literature in the general area of sovereign risk analysis, ranging from macroeconomic assessment to advanced forecasting techniques and econometric modelling. A reference list in the aforesaid area is available from the author upon request.

 This is calculated as the deviation of the actual series from a predicted series using only trends or the CPI based real exchange rates.

 A belief running contrary to honouring any obligations and, thus, making optimal for the bank to default. It could also be interpreted as depositors withdrawing their funds simply because they believe that others do so without identifying any balance sheet problems.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.