Financial crises have been a common feature of the economic landscape for more than two centuries. The chapter defines banking crises, considers the type of costs that they impose, and outlines the most common causes of banking crises during the past 200 years. The remainder of the chapter...

We assess the cleansing effects of the recent banking crisis. In U.S. regions with higher levels of supervisory forbearance on distressed banks during the crisis, there is less restructuring in the real sector and the banking sector remains less healthy for several years after the crisis....

This paper introduces a new transmission channel of banking crises where sizable cross-border bank claims on foreign countries with high domestic crisis risk enable contagion to the home economy. This asset-side channel opposes traditional views that see banking crises originating from either...

Emerging market and developing economies have experienced recurrent episodes of rapid debt accumulation over the past fifty years. This paper examines the consequences of debt accumulation using a three-pronged approach: an event study of debt accumulation episodes in 100 emerging market and...

Episodes of debt accumulation have been a recurrent feature of the global economy over the past fifty years. Since 2010, emerging and developing economies have experienced another wave of historically large and rapid debt accumulation. Similar past debt buildups have often ended in widespread...

This paper presents a new dataset on the dynamics of non-performing loans (NPLs) during 88 banking crises since 1990. The data show similarities across crises during NPL build-ups but less so during NPL resolutions. We find a close relationship between NPL problems-elevated and unresolved...

In this paper we assess the merits of financial condition indices constructed using simple averages versus a more sophisticated alternative that uses factor models with time varying parameters. Our analysis is based on data for 18 advanced and emerging economies at a monthly frequency covering...

We analyze the problem of a policy authority (PA) that must decide when to resolve a troubled bank whose underlying solvency is uncertain. Delaying resolution increases the chance that information arrives that reveals the bank's true solvency state. However, delaying resolution also gives...

The choice and structure of a country's exchange rate regime has wide implications for the effectiveness and flexibility of monetary policy tools, as well as for economic and financial stability. We examine 21 instances where exchange rate pegs have been abandoned in the past, to gauge the...

Banking/financial crises have occurred in countries at all levels of income and in all parts of the world. These crises not only occur too frequently, but also are too costly. Countries everywhere therefore have enacted laws that established regulatory authorities with responsibility to...