**Table 2: Summary of Conceptual and Operational Definitions of Different Types of Crises**

|Crisis Type|Conceptual Definition|Operational Definition|
|---|---|---|
|Banking (Liquidity)|A bank cannot honor its immediate<br>contractual obligations|Demand deposits to total assets ratio|
|Banking (Solvency)|The bank’s liabilities exceed its assets|Capital accounts to total assets ratio|
|Balance of Payments|An abrupt loss of international reserves|Year-on-year growth rates of gross<br>international reserves|
|Currency|An abrupt depreciation of the currency|Nominal exchange rates against the US<br>dollar|
|External Debt|Inability of debtors to make timely<br>payments of interests and principals|External debt to exports ratio|
|Growth Rate|A sharp decline in real outputs|Year-on-year growth rate of GDP|
|Financial|An abrupt loss of confidence in a country’s<br>financial sector|Capital flight|

_Note: Conceptual definition is descriptive expression of crisis, while operational definition is an indicator to divide crisis and non-crisis periods Source: Author_

# **2.3.1 Balance of Payments Crises**

An operational definition of balance of payments crises is rarely found, although most studies agree on the conceptual definition, which is an abrupt loss of international reserves. Several studies (for example, IMF (2000)) examine reserve adequacy levels by using, for example, the reserve to imports ratio (as months of imports) and the short-term external debt to reserve ratio from the viewpoint of the correlation with crisis incidences. However, these ratios do not necessarily fit the conceptual definitions, since these ratios show adequate levels of reserves rather than balance of payments crises per se. Since the essence of balance of payments crises is a decline in reserves, year-on-year growth rates of gross international reserves can be used as an indicator in order to avoid seasonal fluctuations.<sup>(5)</sup>

# **2.3.2 Banking Crises**

Banking crises can be divided into liquidity and solvency crises. As the essence of liquidity type banking crises is _bank runs_ , deposit figures especially demand deposits seem to be an appropriate indicator. Demand deposits are more suitable than time deposits, since time deposits are tied in certain periods and difficult to cancel before maturity. Therefore, time deposits may not properly capture bank run situations. In order to measure a solvency problem of the banking system, capital figures are used as an indicator. Demand deposits and capital account figures are adjusted by the ratio in total assets. This is because absolute levels or growth rates in local currencies are distorted when banking crises are associated with currency crises. Although BIS (Bank for International Settlement) own capital ratio is widely used to measure the healthiness of the banking system, data is difficult to obtain on a timely basis and time -series data is mostly unavailable in developing countries.

# **2.3.3 Currency Crises**

The conceptual definition of currency crises is generally agreed, which is an abrupt depreciation of the currency, though there are two issues such as whether to include unsuccessful currency attacks and whether to choose nominal or real exchange rates. The supporters of the inclusion of unsuccessful currency attacks propose to construct a currency pressure index composed of exchange rates, interest rates and international 8