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Systemic Financial Crises, Balance Sheets, and Model Uncertainity

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  • Mr. Melvyn Weeks
  • Mr. Mark R. Stone

Abstract

This paper empirically examines the probability and intensity of financial crises during the 1990s with a view to informing crisis prevention and mitigation policies. The econometric analysis uses a decision-theoretic approach, rather than the more standard general-to-specific approach, to address the high degree of model uncertainty. The results affirm the importance of balance sheets in the probability and intensity of financial crises, especially corporate balance sheet stresses and foreign exchange liquidity shortfalls. Model uncertainty is a bigger problem for estimating crisis intensity compared to crisis probability.

Suggested Citation

  • Mr. Melvyn Weeks & Mr. Mark R. Stone, 2001. "Systemic Financial Crises, Balance Sheets, and Model Uncertainity," IMF Working Papers 2001/162, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2001/162
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    Citations

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    Cited by:

    1. Massacci, D., 2007. "Identification and Estimation in an Incoherent Model of Contagion," Cambridge Working Papers in Economics 0744, Faculty of Economics, University of Cambridge.
    2. Pesaran, M. Hashem & Pick, Andreas, 2007. "Econometric issues in the analysis of contagion," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1245-1277, April.
    3. Saibal Ghosh, 2005. "Does leverage influence banks' non-performing loans? Evidence from India," Applied Economics Letters, Taylor & Francis Journals, vol. 12(15), pages 913-918.
    4. Ramkishen S. Rajan, 2007. "Managing new-style currency crises: the swan diagram approach revisited," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(5), pages 583-606.
    5. Garratt, Anthony & Lee, Kevin & Mise, Emi & Shields, Kalvinder, 2009. "Real time representation of the UK output gap in the presence of model uncertainty," International Journal of Forecasting, Elsevier, vol. 25(1), pages 81-102.
    6. Kadri Männasoo, 2007. "Determinants of firm sustainability in Estonia," Bank of Estonia Working Papers 2007-04, Bank of Estonia, revised 08 Mar 2007.
    7. Andre Cartapanis, 2004. "Le declenchement des crises de change : qu'avons-nous appris depuis dix ans ?," Economie Internationale, CEPII research center, issue 97, pages 5-48.
    8. Emanuele Bacchiocchi & Marta Bevilacqua, 2009. "International crises, instability periods and contagion: the case of the ERM," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 56(2), pages 105-122, June.
    9. Saibal Ghosh, 2008. "Leverage, foreign borrowing and corporate performance: firm-level evidence for India," Applied Economics Letters, Taylor & Francis Journals, vol. 15(8), pages 607-616.
    10. de Bandt,O. & Malik, S., 2010. "Is there Evidence of Shift-Contagion in International Housing Markets?," Working papers 295, Banque de France.
    11. Joël van der Weele, 2005. "Financing development: debt versus equity," DNB Working Papers 038, Netherlands Central Bank, Research Department.
    12. Mr. Joshua E. Greene, 2002. "The Output Decline in Asian Crisis Countries: Investment Aspects," IMF Working Papers 2002/025, International Monetary Fund.

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