Stability periods between financial crises: The role of macroeconomic fundamentals and crises management policies |
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| Institution: | 1. School of Information Technology, Jiangxi University of Finance and Economics, Nanchang 330013, China;2. School of Business Administration, Northeastern University, Shenyang 110819, China;3. Department of Economics, Acadia University, Wolfville, NS B4P 2R6, Canada;4. School of Business Administration, Acadia University, Wolfville, NS B4P 2R6, Canada;1. Department of Economics, Hanken School of Economics, PO Box 479, Fi-00101 Helsinki, Finland;2. SITE, Stockholm School of Economics, Stockholm, Sweden;3. Ifo Institute, Poschingerstr. 5, 81679 Munich, Germany;4. Department of Economics, University of Munich, Munich, Germany;5. CESifo, Germany;6. IZA, Germany;1. Department of Economics, University of Perugia, Via A. Pascoli, 20, 06123 Perugia, Italy;2. Department of Economics and Social Sciences, Università Politecnica delle Marche and MoFiR, P.le Martelli, 8, 60121 Ancona, Italy;1. Department of Finance, School of Economics and Management, Changzhou University, Changzhou 213164, PR China;2. School of Business Administration, Zhejiang Gongshang University, Hangzhou 310018, PR China;3. Department of Accounting and Finance, School of Management, Zhejiang University, Hangzhou 310058, PR China |
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| Abstract: | This study aims to identify which factors explain why some countries enjoy long durations of stability, while others experience crises in shorter intervals. We analyze the duration of stability periods between currency, debt, and banking crises by employing an innovative econometric strategy, the Finite Mixture Model (FMM). Real and financial variables show high predictive power for stability spells between currency crises. Regarding debt crises, the real interest rate is observed to be the best predictor. The time between systemic financial crises appears to be prolonged through government interventions and through IMF program participation, while bank recapitalization has a negative impact. |
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