Abstract not found

During the twentieth century, emerging and advanced economy financial crises bore some distinct qualitative similarities, although several features of emerging markets made their economies more volatile and crisis prone. For the advanced economies, the build-up and repercussions of the twenty-first century’s first global crisis were similar to earlier crisis events. Emerging economies, however, displayed surprising resilience in 2007-2009. In light of evidence on past crises, this resilience may reflect the widespread avoidance of leverage booms during the 2000s, as well as the pursuit of more stable monetary and fiscal policies.

JEL No. F3,H6,N10 Newly developed long historical time series on public debt, along with modern data on external debts, allow a deeper analysis of the cycles underlying serial debt and banking crises. The evidence confirms a strong link between banking crises and sovereign default across the economic history of great many countries, advanced and emerging alike. The focus of the analysis is on three related hypotheses tested with both “world ” aggregate levels and on an individual country basis. First, private debt surges are a recurring antecedent to banking crises; governments quite contribute to this stage of the borrowing boom. Second, banking crises (both domestic ones and those emanating from international financial centers) often precede or accompany sovereign debt crises. Indeed, we find they help predict them. Third, public borrowing accelerates markedly ahead of a sovereign debt crisis; governments often have “hidden debts ” that far exceed the better documented levels of external debt. These hidden debts encompass domestic public debts (which prior to our data were largely undocumented).

We are very grateful to Béatrice Saes–Escorbiac and Aurélie Touchais for excellent research assistance. The views expressed in this paper do not necessarily re‡ect those of the Banque de France. We thank participants at the conference “The Macroeconomics of Housing Markets ” (held in Paris on 3-4 December 2009) and at the ECB expert meeting on “Tools for detecting asset-price imbalances, the role of money and credit and the impact on consumer-price in‡ation ” (held at Frankfurt on 15 December 2009). In particular, we thank our discussants Timo Wollmershäuser, Giovanni Ferri and Nicola Doyle for helpful comments. We are also grateful to the BIS for having kindly provided us with asset-price data.

Some of this research was undertaken while Taylor was a visitor at the London School of Economics and a Houblon-Norman/George Fellow at the Bank of England. The generous support of both institutions

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper documents developments in mortgage credit and the housing sector in Latin America over the past decade, and compares them with those of other emerging economies. In particular, it examines the real estate and mortgage markets to assess whether (i) growth in mortgage credit is excessive compared to long-term trends; (ii) trends in house prices reflect changes in economic fundamentals; and (iii) the extent to which household and banking sector vulnerabilities could lead to potential fragilities. Although data limitations hamper a rigorous analysis of trends, our analysis suggests that while there are no imminent misalignments in the real estate and mortgage sectors, they could emerge if current trends persist. Strengthening supervision and addressing data gaps is thus critical to ensure adequate monitoring of risks and vulnerabilities in these sectors.