Resolution of Banking Crises: The Good, the Bad, and the Ugly

By Luc Laeven, Fabián Valencia. Social Science Research Network, 2010

795 citations recorded by the source corpus.

This paper presents a new database of systemic banking crises for the period 1970-2009. While there are many commonalities between recent and past crises, both in terms of underlying causes and policy responses, there are some important differences in terms of the scale and scope of interventions. Direct fiscal costs to support the financial sector were smaller this time as a consequence of swift policy action and significant indirect support from expansionary monetary and fiscal policy, the widespread use of guarantees on liabilities, and direct purchases of assets. While these policies have reduced the real impact of the current crisis, they have increased the burden of public debt and the size of government contingent liabilities, raising concerns about fiscal sustainability in some countries.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/f56030d65ddc46f46e753db44f24a7614347dd6b

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Citations in the corpus

Bank Behavior in Response to Basel III: A Cross-Country Analysis (2011, methodology): “…crisis episodes with the exceptions of 2008 crises in Japan and New Zealand which are only captured by the IMP index and a 2008 crisis in Switzerland which is only captured by the Laeven and Valencia (2010) study because the data to calculate the IMP index was not available for the latter country.”
Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises?: Cross-Country Evidence on Bonanzas in Capital Inflows and Bonanza-Boom-Bust Cycles (2012, positive): “As noted by Boyd et al. (2010), the identification methodology of crises by Laeven and Valencia (2010) relies on a broad definition of a systemic banking crisis and combines quantitative data with some subjective assessment of the situation.”
Monetary Policy Spillovers and the Trilemma in the New Normal: Periphery Country Sensitivity to Core Country Conditions (2016, positive): “It is from Aizenman and Ito (2013) who follow the methodology of Laeven and Valencia (2008, 2010, 2012).”
Religiosity and Earnings Management: International Evidence from the Banking Industry (2014, positive): “However, the financial crisis spread to other countries in 2008 (Laeven and Valencia 2010). probability of reporting asset deterioration (proxied by incidence of large LLP) and lower probability of having poor performance.”
How Does Fiscal Consolidation Impact on Income Inequality (2013, methodology): “…distribution of income: the coefficients associated with consolidation programs during no banking crises are statistically significant and positive for both the identification based on the work of Laeven and Valencia (2010) – i.e. 0.019 – and the research by Reinhart and Rogoff (2011) – i.e. 0.033.”
The Flight Home Effect: Evidence from the Syndicated Loan Market During Financial Crises (2012, methodology): “To test this hypothesis, we obtain data from Laeven and Valencia (2010) on the list of intervened banks benefiting from government bailouts during the 2007–08 financial crisis. We define a dummy variable that takes value equal to 1 for banks that were nationalized or received government support in t”
Collectivism and corruption in bank lending (2013, neutral): “…6) Bank Crisis, a dummy variable that takes the value of 1 if a country suffered a systemic baking crisis during the 1997-1999 period and 0 otherwise (Laeven & Valencia, 2010), and Sovereign Default, a dummy variable that equals 1 if a country defaulted on its sovereign debt during the…”
The Euro Area Crisis: Need for a Supranational Fiscal Risk Sharing Mechanism? (2013, positive): “Downturns are alternatively identified using financial crises (banking, currency and debt crises occurrence - taken from Laeven and Valencia 2008, 2010), and by peak-to-trough changes in GDP (applying the approach proposed by Harding and Pagan (2002) to quarterly GDP data).”