Pandemics of the Poor and Banking Stability

31 Pages Posted: 10 May 2012

See all articles by Patrick L. Leoni

Patrick L. Leoni

Kedge Business School

Thomas Lagoarde-Segot

Euromed Management Marseille

Date Written: May 10, 2012

Abstract

We first develop a standard theoretical model that shows that the likelihood of a collapse of the banking industry of a developing country increases, as the joint prevalence of large pandemics such as AIDS and malaria increases. We also show that the optimal bank reserves increase as the prevalence increases. In the empirical part of the paper, we consider a large dataset of developing countries, and we exhibit a strong causality effect from combined prevalence to deposit turnover, as well as a strong causality effect from an increase of combined prevalence to an increase in bank reserves. This effect is strong for tuberculosis. Those empirical facts therefore strongly support our theoretical findings.

Keywords: Pandemics, banking stability, households' deposits, Poor countries

JEL Classification: I18, G21, G28

Suggested Citation

Leoni, Patrick L. and Lagoarde-Segot, Thomas, Pandemics of the Poor and Banking Stability (May 10, 2012). Available at SSRN: https://ssrn.com/abstract=2055954 or http://dx.doi.org/10.2139/ssrn.2055954

Patrick L. Leoni (Contact Author)

Kedge Business School ( email )

Domaine de Luminy - BP 921
BP 921
Marseille, PACA 13288
France

Thomas Lagoarde-Segot

Euromed Management Marseille ( email )

Domaine de Luminy
BP 921 13288 Marseille Cedex 9, 13288
France

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