2014
DOI: 10.1016/j.jbankfin.2014.03.001
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Macro-financial determinants of the great financial crisis: Implications for financial regulation

Abstract: By analysing the macro financial determinants of the Great Financial Crisis of 2007-2009 on 83 countries, we find that the probability of suffering the crisis in 2008 was larger for countries having higher levels of credit deposit ratio whereas it was lower for countries having higher levels of: i) net interest margin, ii) concentration in the banking sector, iii) restrictions to bank activities, iv) private monitoring. Our findings contribute to the ongoing discussion that can help policymakers calibrate new … Show more

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Cited by 61 publications
(40 citation statements)
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“…To explain both the probability of a systemic banking crisis and the fiscal cost in the event of a crisis, we rely on three groups of explanatory variables covering macroeconomic shocks, macrofinancial shocks and institutionnal factors, that all have been highlighted by the existing literature (see Detragiache & DemirgucKunt (2005); Demirguc-Kunt & Detragiache (1997Detragiache ( , 1999, Caprio et al (2010), and Hardy & Pazarbasioglu (1999)). Unfortunately, due to data limitations, we were obliged to drop most financial variables.…”
Section: Systemic Banking Crisis: Econometric Methodologymentioning
confidence: 99%
“…To explain both the probability of a systemic banking crisis and the fiscal cost in the event of a crisis, we rely on three groups of explanatory variables covering macroeconomic shocks, macrofinancial shocks and institutionnal factors, that all have been highlighted by the existing literature (see Detragiache & DemirgucKunt (2005); Demirguc-Kunt & Detragiache (1997Detragiache ( , 1999, Caprio et al (2010), and Hardy & Pazarbasioglu (1999)). Unfortunately, due to data limitations, we were obliged to drop most financial variables.…”
Section: Systemic Banking Crisis: Econometric Methodologymentioning
confidence: 99%
“…Bearing in mind the weaknesses of Granger methodology, we can conclude that the Granger test results clearly show that the origin of financial instability in Italy lies in a lack of confidence in the long‐term rigorous public financial commitments that affected sovereign CDS. In this country, the banking sector seems to be stable enough not to affect the public sector, due to its traditional business model (Caprio et al, ).…”
Section: Granger Causality In the European Crisesmentioning
confidence: 99%
“…However, banking regulation, almost invariably, fails to recognize the positive role of diversifi cation and instead increases regulatory requirements indistinctly, such as capital ratios, and creates new rules, such as liquidity ratios, for all banks. With the words of de Larosière (2011) Higher capitalization proved neither capable of reducing the likelihood of national banking systems experiencing the Great Crisis in 2008 (Caprio et al, 2010) -a less likely event for national systems with more restrictive regulation / supervision -nor of mitigating the fall in banks' stock prices when the market re-priced risk in the aftermath of the Lehman Brothers' bankruptcy (Bongini et al, 2009) -where the share price collapse was lower for intermediaries anchored to the traditional banking model. The paper is organized as follows.…”
Section: Introductionmentioning
confidence: 99%