@techreport{Weller1999Financial,
abstract = {Recent studies have conjectured that there may be a link between financial liberalization and
financial instability in emerging economies. Most of these studies, however, do not investigate
whether emerging economies are becoming structurally more vulnerable to currency and banking
crises. In this paper, we argue that emerging economies are systematically becoming more
susceptible to both currency and banking crises after FL. Using data for 27 emerging economies
from 1973 to the present, univariate and multivariate analyses indicate that the likelihood of
currency crises and banking crises increase after FL. In particular, liberalization allows more
liquidity to enter an emerging economy, which finds its way into productive and speculative
projects. What is common to both types of crises is a significant increase in speculative financing,
thereby increasing the chance for borrower default. Thus, the outflow of international capital
becomes more likely, and we find that the chance of either type of crisis grows faster in response
to changes in short-term loans after FL than before. Similarly, the reactions to overvalued
currencies are at least similar in terms of increasing probabilities of crises in the case of banking
crises, or greater in the case of currency crises after FL as compared to before FL. Further, our
results show that after FL the chance of a currency crisis declines over time, while the chance of
a banking crisis increases.},
address = {Bonn},
author = {Christian E. Weller},
copyright = {http://www.econstor.eu/dspace/Nutzungsbedingungen},
keywords = {F02; F36; F43; 330; Emerging economies; Financial liberalization; financial instability; currency crises; banking crises; Kapitalmarktliberalisierung; Sch\"{a}tzung; W\"{a}hrungskrise; Bankenkrise; Devisenspekulation; Aufstrebende M\"{a}r},
language = {eng},
number = {B 15-1999},
publisher = {ZEI},
title = {Financial crises after financial liberalization: Exceptional circumstances or structural weakness?},
type = {ZEI working paper},
url = {http://hdl.handle.net/10419/39610},
year = {1999}
}
