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Title: Causes of Banking Crises: Deregulation, Credit Booms and Asset Bubbles, Then and Now
Authors: Roy, Saktinil
Keywords: Banking Crisis
Issue Date: 6-Feb-2014
Series/Report no.: 92.927.G1473;
Abstract: We examine similarities in the run-up to banking crises using two essential criteria for their predictability: i) the percentage of a specified number of years prior to a crisis correctly called; and ii) the percentage of true alarms of total alarms for a crisis. Using panel logit models we find that a banking crisis will be sparked by the collapse of a real asset bubble. While such bubbles are associated with popular stories of a new era and an increasingly deregulated financial system, in most cases, this would occur even in the absence of sustained surges of capital inflow, accumulation of public debt, central banks’ low interest rate policies, or structural shocks retarding growth. We also find that a protracted increase in income inequality in the US and other countries helped to inflate the recent housing bubble.
Description: It was a pleasure as well as an opportunity to attend the Allied Social Sciences Association meetings in Philadelphia, held on January 2 –5. I presented my paper, “Causes of Banking Crises: Deregulation, Credit Booms and Asset Bubbles, Then and Now” on January 3rd at the session, “Growth and Socioeconomic Policy.” The analysis and the results of the paper received appreciation from the session participants. I also heard some useful comments that are expected to enrich my next paper on a similar topic. The annual meetings of the Allied Social Sciences Association, organized mainly by the American Economic Association, is one of the largest conferences in the whole world held annually in my field. Academics, researchers and professionals from around the globe attended and presented at the conference. It was, therefore, also an opportunity to attend other sessions and hear how economics and finance researchers from different countries are analyzing the recent global crisis and the ongoing policy debates in Europe and North America. I also attended a very important panel discussion on the current macroeconomic policy issues. The experience and knowledge gained from these sessions will be useful, as my current research is also in these areas.
Appears in Collections:Academic and Professional Development Fund Report 2013-2014

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