Credit Booms, Financial Fragility and Banking Crises

Rewilak, Johan; Fielding, David

Credit Booms, Financial Fragility and Banking Crises

Fielding, David; Rewilak, Johan

Cite this item: Fielding, D., & Rewilak, J. (2015). Credit Booms, Financial Fragility and Banking Crises (Economics Discussion Papers Series No. 1507). University of Otago. Retrieved from http://hdl.handle.net/10523/5840

Permanent link to OUR Archive version: http://hdl.handle.net/10523/5840

Date: 2015-08

Publisher: University of Otago

Series: Economics Discussion Papers Series

Series number: 1507

ISSN: 1178-2293 (Online)

Keywords: panel data; financial crises; financial fragility; credit booms; capital surges

Research Type: Discussion Paper

Languages: English

Abstract:

Recent evidence indicates that surges in capital inflows and credit booms can increase the probability of a subsequent banking crisis. Using a new country-level panel database on financial fragility, we take this analysis further by exploring the interaction of surges, booms and fragility. We find that booms and fragility are both important, but booms increase the probability of a crisis only in financial systems with a relatively high level of fragility. Booms appear not to be dangerous in countries with a robust banking system.

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