The impact of financial liberalization on the likelihood of banking crises.
This study departs from the previous empirical studies on the subject in several important ways concerning both the sample and the methodology used. Firstly, it focuses entirely at the link between the two events with the use of real variables, meaning the 6 indices of financial repression, as signals of a financial liberalization. Another innovation is the introduction for the first time of a measure of international liquidity, U.S. M3/GDP, as the 7th explanatory variable in the model. Moreover, special priority was given to the construction of reliable model with lagged values, as an attempt to construct an efficient warning system of oncoming banking crises. Finally, the input data is on a monthly basis rather than an annual one like all the previous studies at the cost of a more limited sample.