Resolving Systemic Financial Crisis: Policies and Institutions
The authors analyze the role of institutions in resolving systemic banking crises for a broad sample of countries. Banking crises are fiscally costly, especially when policies like substantial liquidity support, explicit government guarantees on fi...
| Main Authors: | , , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/08/5104607/resolving-systemic-financial-crisis-policies-institutions http://hdl.handle.net/10986/14149 |
| Summary: | The authors analyze the role of
institutions in resolving systemic banking crises for a
broad sample of countries. Banking crises are fiscally
costly, especially when policies like substantial liquidity
support, explicit government guarantees on financial
institutions liabilities, and forbearance from prudential
regulations are used. Higher fiscal outlays do not, however,
accelerate the recovery from a crisis. Better
institutions less corruption, improved law and order, legal
system, and bureaucracy do. The authors find these results
to be relatively robust to estimation techniques, including
controlling for the effects of a poor institutional
environment on the likelihood of financial crisis and the
size of fiscal costs. Their results suggest that countries
should use strict policies to resolve a crisis and use the
crisis as an opportunity to implement medium-term structural
reforms, which will also help avoid future systemic crises. |
|---|