Assessing the Impact of Private Sector Balance Sheets Effects on Financial Crises: a comparison of Bayesian and information-theoretic measures of model uncertainty
AbstractThis paper examines the intensity of financial crises during the 1990s with a view to informing crisis prevention and mitigation policies. We compare the performance of a full Bayesian and an information-theoretic approach in addressing the econometric problems posed by the lack of a unifying theoretical model, a large number of crisis indicators, and a number of additional data shortfalls. The results indicate that the probability and intensity of financial crises are heightened by corporate illiquidity and leverage, a lack of nonbank sources of financing, excessive domestic relative to foreign currency liquidity and a cutoff of capital inflows. The implications are that policy measures aimed at improving the operation and monitoring of the corporate and nonbank financial sectors could reduce crisis vulnerability
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Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 162.
Date of creation: 11 Aug 2004
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Model Uncertainty; Financial Crises; Bayesian Inference; AIC; Kullback Leibler; Model Averaging;
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- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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