Empirical Links between Twin Crises in the 1980s and the 1990s: Were there Differences?
This article examines the empirics of twin crises for a sample of 33 developing countries. We use the same methodology to identify currency and banking crises. We find that twin crises in the 1980s tended to show up as a currency crisis followed by a banking crisis. This pattern changes in the 1990s with twin crises showing up as a banking crisis followed by a currency crisis. Currency crises in the 1990s are strongly correlated with high M2 to foreign reserves ratio. Banking crises in the 1990s are more likely associated with a boom and bust cycle in credit growth.
KeywordsReal Exchange Rate Nominal Interest Rate Currency Crisis Banking Crisis Foreign Reserve
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