Policy recommendations based on the findings are:

- (i) Since characteristics of cris is are not identical across countries and periods, policy makers should pay more attention to changing characteristics of crises;

- (ii) As the interactions between crises seem to be closer in recent periods, policy makers should prepare policies to mitigate risks of crisis diffusion once one type of crisis is observed.  For example, when currency crises are observed, policy makers should assess the risk of the liquidity type banking crises;

- (iii) As currency crises tend to lead to other crisis types, exchange rate management is essential.  However, recent experiences such as Indonesia in 1998 and Argentina in 2002 suggest that once sharp currency depreciation starts it is difficult to stop the momentum.  Therefore, policy makers should be aware of the importance of exchange rate policies even in non-crisis periods.

# **Notes**

- (1) Sachs (1998), Aziz et al (2000), and IMF (1998) also use the same conceptual definition.  In addition, Sachs (1998, p.248) explains banking crises as “commercial banks abruptly lose the ability to roll over market instrument.”

- (2) For example, Glick and Hutchison (1999), Kaminsky and Reinhart (1998) and Aziz et al. (2000) and Ahluwalia (2000) take this position.

- (3) Aziz et al (2000, p.6) and IMF (1998, p.75) use the same conceptual definition

- (4) Glick and Hutchison (1999), Kaminsky and Reinhart (1998), Aziz, Caramazza and Salgado (2000), Moreno and Trehan (2000), Esquivel and Larrain (1998), Ahluwalia (2000), Eichengreen, Rose and Wyplosz (1997), Caramazza, Ricci, and Salgado (2000), Osband and Rijckeghem (2000)

- (5) In order to verify that gross reserve growth rates are a better indicator than the reserve to imports ratio, a separate analysis is conducted.  The analysis shows the ratio cannot well capture widely recognized balance of payments episodes such as the Argentina crisis in 2001-02.

- (6) Esquivel and Larrain (1998) take the same position

- (7) Aziz et al (2000, p.6) take the same position

- (8) The 15 countries are same as the ones used in later in this chapter

- (9) The identification also depends on the choices of the threshold and sample periods

# **References**

- Ahluwalia, Pavan. 2000. “Discriminating Contagion: An Alternative Explanation of Contagious Currency Crises in Emerging Markets” _IMF Working Paper_ WP/00/14

Ajayi, S. Ibi. 1997. “An Analysis of External Debt and Capital Flight in the Severely Indebted Low Income Countries in Sub-Saharan Africa” _IMF Working Paper_ WP/97/68

- Aziz, Jahangir, Francesco Caramazza and Ranil Salgado (2000) “Currency Crises: In Search of Common Elements” _IMF Working Paper_ WP/00/67

- Boyd John, Pedro Gomis, Sungkyu Kwak, and Bruce Smith. 2000. "A User's Guide to Banking Crises" Conference Paper, Deposit Insurance Conference

- Bruno, Michael. 1996. _Deep Crises and Reform: What Have We Learned?_ Washington: World Bank

- Caprio, Gerard Jr. 1998. _Banking on Crises: Expensive Lessons from Recent Financial Crises._ Washington: World Bank

- Caprio, Gerard Jr. and Daniela Klingebiel. 1996. “Bank Insolvencies: Cross Country Experience” _IMF Policy Research Working Paper_ 1620

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