Determinants of financial fragility in BRICS, fragile five and EU fifth enlargement countries

The desire of countries for rapid growth, which started with financial liberalization in the 1980s, accelerated during the globalization process in which the flow of financial money increased. Low interest rates, easy access to credit and credit expansion led to the bursting of a huge asset bubble in Japan in the 1990s, which triggered a crisis first in Japan and then in Asia. Countries and institutions constantly resorted to borrowing to grow, which increased public and private sector borrowing. Although the 2008 global crisis was a debt crisis, the expansionary policies implemented by governments to mitigate the effects of the global financial crisis caused the debts of countries and the private sector to increase further. In particular, the increase in public expenditures due to bailout packages created deficits in the budget, which resulted in an increase in debts. High indebtedness ratios caused countries to experience post-crisis vulnerabilities, and especially the Eurozone was plunged into a major debt crisis. Minsky explained capitalist development with business cycles and stated that financial fragility is actually caused by excessive borrowing during periods of economic prosperity and that financial crises are due to the nature of capitalism. Financial fragility is the instability that comes from within financial systems rather than from outside them. It is important to prevent financial crises or reduce their devastating costs, which have a great impact especially on developing countries. This study is motivated by the motivation to obtain evidence on the determinants of financial fragility using an econometric model. The study investigated the determinants of financial fragility in BRICS, Fragile Five and EU Fifth Round Enlargement Countries. As a result of the study, findings on the determinants of financial fragility were obtained. In the thesis, it is observed that foreign trade deficit, private sector debt, inflation, countries' fragility index, interest expenditures, housing loans, consumer loans affect financial fragility significantly and in the same direction, while budget deficit, GDP and total savings are indicators that affect financial fragility significantly and inversely. Decision makers and policy makers should pay more attention to these indicators in their strategies to reduce financial fragility