Leading indicators of crisis incidence: Evidence from developed countries
AbstractWe examine which indicators are most useful in explaining the cost of economic crises in EU and OECD countries between 1970 and 2010. To define the dependent variable we combine a measure of costs to the economy, which consists of the output and employment loss and the fiscal deficit, with a database of crisis occurrence designed specifically for this task. We take into account model uncertainty in two steps. First, for each potential leading indicator we select the relevant prediction horizon by using panel vector autoregression. Second, we identify the most useful leading indicators with Bayesian model averaging. Our results suggest that domestic housing prices, share prices, and credit growth, and some global variables, such as private credit, constitute important sources of risk.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 35 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/30443
Early warning indicators; Bayesian model averaging; Panel VAR; Dynamic panel; Crises;
Other versions of this item:
- Babecký, Jan & Havránek, Tomáš & Matějů, Jakub & Rusnák, Marek & Šmídková, Kateřina & Vašíček, Bořek, 2012. "Leading indicators of crisis incidence: evidence from developed countries," Working Paper Series 1486, European Central Bank.
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
- G01 - Financial Economics - - General - - - Financial Crises
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