Commodity Price Movements and Banking Crises

By Markus Eberhardt, Andrea F Presbitero

July 6, 2018

Preview Citation

Format: Chicago

Markus Eberhardt, and Andrea F Presbitero. Commodity Price Movements and Banking Crises, (USA: International Monetary Fund, 2018) accessed November 12, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We develop an empirical model to predict banking crises in a sample of 60 low-income countries (LICs) over the 1981-2015 period. Given the recent emergence of financial sector stress associated with low commodity prices in several LICs, we assign price movements in primary commodities a key role in our model. Accounting for changes in commodity prices significantly increases the predictive power of the model. The commodity price effect is economically substantial and robust to the inclusion of a wide array of potential drivers of banking crises. We confirm that net capital inflows increase the likelihood of a crisis; however, in contrast to recent findings for advanced and emerging economies, credit growth and capital flow surges play no significant role in predicting banking crises in LICs.

Subject: Balance of payments, Banking crises, Capital inflows, Commodity price fluctuations, Commodity prices, Financial crises, Prices

Keywords: Aggregate commodity price movement, Banking crises, Banking crisis, Capital inflows, Commodity exporter, Commodity price, Commodity price behavior, Commodity price fluctuations, Commodity price growth, Commodity price growth margin, Commodity price volatility measure, Commodity prices, Crisis dummy, Crisis event, Early warning system, Exchange rate, Global, Growth margin, Low-income countries, Volatility measure, WP

Publication Details

Pages:

53
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2018/153
Stock No:

WPIEA2018153
ISBN:

9781484366776
ISSN:

1018-5941

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