Michael Hutchison & Kathleen Mcdill - Determinants, Costs, And Duration Of Bank Sector DistressPdf

This paper examines episodes of banking sector distress for a large sample of countries, highlighting the experience of Japan. We estimate a model that links the onset of banking problems to a set of macroeconomic variables and institutional characteristics. The model predicts a high probability of banking sector distress in Japan in the early 1990s, matching actual developments closely, and suggests that the Japanese episode fits a well-established pattern characterizing banking sector problems elsewhere. An empirical model explaining the output cost of banking sector distress is also investigated. The results indicate that output loss is smaller the more quickly banking sector problems are resolved and when exchange...