A Chronicle of the Banking and Currency Crises
Posted: 30 Mar 2005
The paper surveys the research undertaken in the area of banking and currency crises. 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.
Keywords: Banking crises, Currency crashes, Modelling default, Early warning indicators
JEL Classification: F21, F31, G15, G21
Suggested Citation: Suggested Citation