A Research On Coincidence Of Banking Crises And Currency Crises

A reseach of coincidence of banking crises and currency crises is mainly on their relationship.Currency crises is the direct cause of the imbalance between supply and demand in the foreign exchange market.Foreign exchange demand is greater than the supply of it, lead to the currency devaluation. Excessive demand for foreign exchange means that a large number of local currency were converted into foreign exchange, that is, a large number of domestic capital flight. On the one hand, the banking crises led directly to banking failures and the decline in bank credit rating; on the other hand, indirectly led to the bankruptcy of many large enterprises as well as the burst of implied warranties. Both will lead to capital outflows. Currency crises and devaluation will worsen the situation of the bank's assets and liabilities, at the same time will make the stock capital flight, real estate,other asset prices and the non-performing loan ratio of banks increased. Bank assets,liabilities and the deterioration of the situation of non-performing loan ratio will accelerate the increase in the outbreak of banking crises.In this thesis, the ratio of bank non-performing loans as a proxy indicator of banking crises, the foreign exchange market pressure index as a proxy indicator of the currency crises, the use of panel data regression analysis of the 1996-2007 year on 43 different countries or regions to estimate the sample data show that banking crises and currency crises simultaneously significant symbiotic relationship. Adding lagged variables in the sample data after the re-estimates that the currency crises lag well to predict the future occurrence of a banking crisis, on the contrary is not. Compared with industrial countries, symbiotic relationship between currency crises and banking crises is more significant in emerging markets. Empirical results show that currency crises more easily triggered financial crises in symbiosis, it means that we should pay attention to the scale of the capital outflow controls and monetary policy choices.As China's capital account liberalization and the current global financial crises in the context of the spread, we should take to a moderately tight monetary policy in order to prevent symbiotic financial crises and avoid the expansion of the bubble economy. At the same time,we should change the pattern of economic growth and industrial structure upgrade to accelerate , and maintain sustained economic growth.