Commodity prices and banking crises

Commodity prices are one of the most important drivers output fluctuations in developing countries. We show that a major channel through which commodity price movements can affect real economy is their effect on banks' balance sheets and financial stability. Our analysis finds volatility significant predictor banking crises sample 60 low-income countries (LICs). In contrast to recent findings for advanced emerging economies, credit booms capital inflows do not play role predicting crises, consistent with lack de facto liberalization LICs. corroborate our main historical data 40 ‘peripheral’ economies between 1848 1938. The concentrated LICs fixed exchange rate regime high share primary goods production. also find likely trigger instability reduction government revenues shortening sovereign debt maturity, weaken sheets.