Financial structure, capital openness and financial crisis

This paper examines how the financial structure and capital openness of a country have affected the likelihood of financial crisis over the past two decades. By applying a panel probit estimation to a sample of 38 countries, we find the following. 1) An economy with a more market-based financial structure is less likely to experience a currency crisis. 2) More capital openness is associated with a lower probability of a currency crisis. 3) Countries with a more market-based financial structure are also less likely to experience a currency crisis if that structure is coupled with a more open capital account. 4) Unlike what is found for currency crises, neither financial structure nor capital openness has any effect on banking crises.