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The Impact of Banking Crises on Money Demand and Price Stability / Peria, Maria
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Peria, Maria
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Central Banks.
- Currencies and Exchange Rates.
- Debt Markets.
- Demand.
- Demand For Money.
- Deregulation.
- Economic Theory and Research.
- Emerging Markets.
- Equations.
- Exchange.
- Exchange Rates.
- Finance and Financial Sector Development.
- Financial Intermediation.
- Financial Literacy.
- Fiscal and Monetary Policy.
- Government Bonds.
- Inflation.
- Interest.
- Interest Rates.
- Labor Policies.
- M2.
- Macroeconomics and Economic Growth.
- Markets and Market Access.
- Monetary Policy.
- Money.
- Multipliers.
- Prices.
- Private Sector Development.
- Public Sector Development.
- Social Protections and Labor.
- Stock.
- Stock Prices.
- T-Bills.
- Variables.
- Local Subjects:
- Central Banks.
- Currencies and Exchange Rates.
- Debt Markets.
- Demand.
- Demand For Money.
- Deregulation.
- Economic Theory and Research.
- Emerging Markets.
- Equations.
- Exchange.
- Exchange Rates.
- Finance and Financial Sector Development.
- Financial Intermediation.
- Financial Literacy.
- Fiscal and Monetary Policy.
- Government Bonds.
- Inflation.
- Interest.
- Interest Rates.
- Labor Policies.
- M2.
- Macroeconomics and Economic Growth.
- Markets and Market Access.
- Monetary Policy.
- Money.
- Multipliers.
- Prices.
- Private Sector Development.
- Public Sector Development.
- Social Protections and Labor.
- Stock.
- Stock Prices.
- T-Bills.
- Variables.
- Physical Description:
- 1 online resource (86 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 1999
- System Details:
- data file
- Summary:
- March 2000 - Policymakers in countries undergoing banking crises should not worry about the structural stability of money demand functions; the behavior of money demand during crises can be modeled by the same function used during periods of tranquility. But policymakers should be aware that in some instances crises can give rise to variance instability in the price or inflation equations. Martinez Peria empirically investigates the monetary impact of banking crises in Chile, Colombia, Denmark, Japan, Kenya, Malaysia, and Uruguay. She uses cointegration analysis and error correction modeling to research: Whether money demand stability is threatened by banking crises; Whether crises bring about structural breaks in the relationship between monetary indicators and prices. Overall, she finds no systematic evidence that banking crises cause money demand instability. Nor do the results consistently support the notion that the relationship between monetary indicators and prices undergoes structural breaks during crises. However, although individual coefficients in price equations do not seem to be severely affected by crises, crises can sometimes give rise to variance instability in price or inflation equations. This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to study banking crises. The study was funded by the Bank's Research Support Budget under the research project Monetary Policy and Monetary Indicators during Banking Crises (RPO 683-24). The author may be contacted at mmartinezperia@worldbank.org.
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