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This article asks whether capital inflows bonanzas increase the probability of banking crises and whether this occurs through a lending boom mechanism. Results indicate that bonanzas more than triple the odds of a crisis, raising its probability to 14% (from an unconditional probability of 4%). This effect exists in the absence of a lending boom and is found in both net and gross inflows bonanzas. This effect is driven by portfolio-equity and debt flows. While the effect of debt is channelled through excessive lending, the effect of portfolio-equity flows is present even in the absence of a lending boom
