A key precursor of twentieth-century financial crises in emerging and advanced economies alike was the rapid buildup of leverage. Those emerging economies that avoided leverage booms during the 2000s also were most likely to avoid the worst effects of the twenty-first century's first global crisis. A discrete-choice panel analysis using 1973-2010 data suggests that domestic credit expansion and real
currency appreciation have been the most robust and significant predictors
of financial crises, regardless of whether a country is emerging or advanced. For emerging economies, however, higher foreign exchange reserves predict a sharply reduced probability of a subsequent crisis. (JEL E44, F34, F44, G01, G21, O19)
Gourinchas, Pierre-Olivier, and Maurice Obstfeld.
"Stories of the Twentieth Century for the Twenty-First."
American Economic Journal: Macroeconomics,
Financial Markets and the Macroeconomy
International Lending and Debt Problems
International Business Cycles
Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
International Linkages to Development; Role of International Organizations