THE DETERMINANTS OF BANKING CRISES IN DEVELOPING AND DEVELOPED-COUNTRIES

The paper studies the factors associated with the emergence of systemi c banking crises in a large sample of developed and developing countri es in 1980-94 using a multivariate logit econometric model. The result s suggest that crises tend to erupt when the macroeconomic environment is weak, particularly when growth is low and inflation is high. Also, high real interest rates are clearly associated with systemic banking sector problems, and there is some evidence that vulnerability to bal ance of payments crises has played a role. Countries with an explicit deposit insurance scheme were particularly at risk, as were countries with weak law enforcement.