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Drivers of Systemic Banking Crises: The Role of Financial Account Structure and Financial Integration

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  • Rudiger Ahrend
  • Antoine Goujard

Abstract

type="main" xml:lang="en"> This paper examines whether the composition of a country's external liabilities and assets affects its risk of suffering financial turmoil. Using a panel of 184 developed and emerging economies from 1970 to 2009, and looking at the impact of financial account structure in normal times and in situations of bank balance-sheet contagion shocks, we find that the structure of the financial account indeed has an important influence on financial stability. A bias in external liabilities towards debt appears to increase strongly the risk of a systemic banking crisis. Moreover, certain forms of international financial integration, such as integration through international bank lending, amplify contagion shocks and increase crisis risk, particularly in the case of short-term bank debt.

Suggested Citation

  • Rudiger Ahrend & Antoine Goujard, 2014. "Drivers of Systemic Banking Crises: The Role of Financial Account Structure and Financial Integration," International Finance, Wiley Blackwell, vol. 17(2), pages 135-160, June.
  • Handle: RePEc:bla:intfin:v:17:y:2014:i:2:p:135-160
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    Cited by:

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    3. Julian Caballero, 2012. "Banking Crises and Financial Integration," Research Department Publications 4816, Inter-American Development Bank, Research Department.
    4. Antonio Cabrales & Piero Gottardi & Fernando Vega-Redondo, 2017. "Risk Sharing and Contagion in Networks," The Review of Financial Studies, Society for Financial Studies, vol. 30(9), pages 3086-3127.
    5. Nabila Boukef Jlassi & Helmi Hamdi & Joseph P. Joyce, 2018. "External liabilities, domestic institutions and banking crises in developing economies," Review of International Economics, Wiley Blackwell, vol. 26(1), pages 96-116, February.
    6. Rudiger Ahrend & Antoine Goujard, 2012. "International Capital Mobility and Financial Fragility - Part 3. How Do Structural Policies Affect Financial Crisis Risk?: Evidence from Past Crises Across OECD and Emerging Economies," OECD Economics Department Working Papers 966, OECD Publishing.
    7. Gaies, Brahim & Goutte, Stéphane & Guesmi, Khaled, 2019. "Banking crises in developing countries–What crucial role of exchange rate stability and external liabilities?," Finance Research Letters, Elsevier, vol. 31(C).
    8. Joseph P. Joyce, 2018. "External balance sheets as countercyclical crisis buffers," International Economics and Economic Policy, Springer, vol. 15(2), pages 305-329, April.
    9. Douglas Sutherland & Peter Hoeller & Rossana Merola & Volker Ziemann, 2012. "Debt and Macroeconomic Stability," OECD Economics Department Working Papers 1003, OECD Publishing.
    10. Bicu, Andreea & Candelon, Bertrand, 2013. "On the importance of indirect banking vulnerabilities in the Eurozone," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5007-5024.
    11. Rudiger Ahrend & Cyrille Schwellnus, 2012. "International Capital Mobility and Financial Fragility - Part 4. Which Structural Policies Stabilise Capital Flows When Investors Suddenly Change Their Mind?: Evidence from Bilateral Bank Data," OECD Economics Department Working Papers 967, OECD Publishing.
    12. Rudiger Ahrend & Antoine Goujard & Cyrille Schwellnus, 2012. "International Capital Mobility: Which Structural Policies Reduce Financial Fragility?," OECD Economic Policy Papers 2, OECD Publishing.
    13. Cabrales, Antonio; Gale, Douglas; Gottardi, Piero, 2015. "Financial Contagion in Networks," Economics Working Papers ECO2015/01, European University Institute.
    14. Giraldo, Carlos & Giraldo, Iader & Gomez-Gonzalez, Jose E. & Uribe, Jorge M., 2024. "Financial integration and banking stability: A post-global crisis assessment," Economic Modelling, Elsevier, vol. 139(C).

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