Capital account openness and early warning system for banking crises in G20 countries |
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Institution: | 1. Antai College of Economics and Management, Shanghai Jiao Tong University, China;2. Department of Economics, University of Pittsburgh, USA;1. Credit Research Centre, Business School, The University of Edinburgh, 29 Buccleuch Place, EH89JS, Edinburgh, UK;2. Business School, The University of Edinburgh, 29 Buccleuch Place, EH89JS Edinburgh, UK |
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Abstract: | This paper develops an early warning system for banking crises in the G20 countries, with the inclusion of capital account openness indicators. Results suggest that the capital account openness demonstrates a significant predictive power on systemic banking crises, and the impact is related with the level of the economic development. For low-income countries, increased capital account openness has a significantly negative impact on the banking crises likelihoods, while for high-income countries it imposes a positive impact. For middle-income countries, however, the occurrence of banking crises is more indifferent to capital account liberalization. |
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