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A Review of the Literature on Early Warning Systems for Banking Crises

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  • Alejandro Gaytán
  • Christian A. Johnson

Abstract

This paper presents a review of alternative methodologies for early detection of banking distress. The methodologies proposed are aimed to the early identification of financial distress for countries without an important recent history of bank failure, but facing an unstable international environment. We evaluate several indicators and methodologies to measure financial distress such as qualitative indicators, the signal extraction approach, limited dependent estimation and finally duration models.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 183.

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Date of creation: Oct 2002
Date of revision:
Handle: RePEc:chb:bcchwp:183

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  1. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
  2. Barry Eichengreen & Andrew K. Rose, 1998. "Staying Afloat When the Wind Shifts: External Factors and Emerging-Market Banking Crises," NBER Working Papers 6370, National Bureau of Economic Research, Inc.
  3. Graciela L. Kaminsky, 1998. "Currency and banking crises: the early warnings of distress," International Finance Discussion Papers 629, Board of Governors of the Federal Reserve System (U.S.).
  4. Kolari, James & Glennon, Dennis & Shin, Hwan & Caputo, Michele, 2002. "Predicting large US commercial bank failures," Journal of Economics and Business, Elsevier, vol. 54(4), pages 361-387.
  5. Daniel C. Hardy & Ceyla Pazarbasioglu, 1999. "Determinants and Leading Indicators of Banking Crises: Further Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 1.
  6. Francis X. Diebold & Glenn D. Rudebusch, 1987. "Scoring the leading indicators," Special Studies Papers 206, Board of Governors of the Federal Reserve System (U.S.).
  7. Gary Gorton, 1986. "Banking panics and business cycles," Working Papers 86-9, Federal Reserve Bank of Philadelphia.
  8. Marcelo Dabos & Walter Sosa Escudero, 2000. "Explaining and Predicting Bank Failure in Argentina Using Duration Models," Working Papers 26, Universidad de San Andres, Departamento de Economia, revised Apr 2000.
  9. Liliana Rojas-Suarez, 2001. "Rating Banks in Emerging Markets: What Credit Rating Agencies Should Learn from Financial Indicators," Working Paper Series WP01-6, Peterson Institute for International Economics.
  10. International Monetary Fund, 1998. "Leading Indicators of Banking Crises-Was Asia Different?," IMF Working Papers 98/91, International Monetary Fund.
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Cited by:
  1. ?tefan Rychtárik & Franco Stragiotti, 2009. "Liquidity Risk Monitoring Framework: A Supervisory Tool," BCL working papers 43, Central Bank of Luxembourg.
  2. Oet, Mikhail V. & Bianco, Timothy & Gramlich, Dieter & Ong, Stephen J., 2013. "SAFE: An early warning system for systemic banking risk," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4510-4533.
  3. Mikhail V. Oet & Ryan Eiben & Timothy Bianco & Dieter Gramlich & Stephen J. Ong & Jing Wang, 2011. "SAFE: An early warning system for systemic banking risk," Working Paper 1129, Federal Reserve Bank of Cleveland.
  4. Davis, E. Philip & Karim, Dilruba, 2008. "Comparing early warning systems for banking crises," Journal of Financial Stability, Elsevier, vol. 4(2), pages 89-120, June.

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