This paper considers the joint role of macro-economic and bankspecific factors in explaining the occurrence of banking problems in the twenty-one Central and East European emerging markets over the recent decade. Using data at the individual bank level we show, using a logit model, that the macroeconomic factors play a central role in determining banking sector instability in the early stages of difficulty, while the bankspecific factors are more important in the later stages and gain more weight as the banking sector develops and the institutional framework becomes mature.
JEL Code: E44, G21
Keywords: banking sector vulnerability, banking crises, early warning indicators, Central and Eastern Europe
Authors' e-mail addresses: [email protected], [email protected]
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