The impact of banking crises on poverty: Panel evidence

Abstract

Introduction Financial crises are one of the most important economic problems in the world economy and especially in developing countries. The global economy and national economies have been experiencing financial crises on short intervals. The basis of crises lies in the desire of financial institutions to grow and get profit in an uncontrolled way and the emergence of risks that become increasingly unmanageable in time. The economic crisis can be defined as the fact that some economic formations which are not previously known or cannot be identified create negative results which will affect the state in general and, in particular, the companies. In a different definition, it can be defined as the fluctuations of the supply and demand in the financial markets above the tolerable level. The banking crises arise from the bad performance of the bank balance sheets and the deterioration of the assets side in the balance sheets of banks. More specifically, the increase in the disruption of the loans, the securities market fluctuations, and the shrinkage in the real sector are the main factors in the formation of banking crises. The perception of negative expectations of households, shaking confidence in banks and depositor runs on banks can lead to banking crisis. Poverty is defined as the ability of households or a specific sector to meet their basic needs in order to maintain the minimum level of living. Absolute poverty is determined by taking into account the number….