The determinants of banking crises: Further evidence

This paper employs a new dataset of 36 EU and OECD countries for the period 1961–2012 to test the importance of economic inequality in banking crises and to find new determinants of them. We estimated a panel logit model with population-averaged results, capturing the most relevant crisis determinants in the literature. By analyzing the impact of inequality on the risk of a banking crisis, we found a new transmission channel of inequality to a financial recession via deficit and obtained a significant and robust positive impact of inequality on the bank crisis probability. We also found evidence that distance to USA, France and Japan decreases the likelihood of a financial crisis. Finally, and contrary to the theory, we found a new determinant that increases the likelihood of a crisis: the accumulated experience of VAT