Abstract
We construct theory-based measures of systemic bank shocks, which differ from “banking crisis” indicators employed in many empirical studies and use these measures to reexamine the empirical evidence on some determinants of banking crises. We show that “banking crisis” indicators actually measure (lagged) policy responses to financial distress and show that key variables such as deposit insurance and safety net guarantees have a significantly different impact on the likelihood of a systemic bank shock and that of a policy response to banking distress. These differences imply that the findings of a large empirical literature need to be re-assessed and/or reinterpreted.
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