Banking crises and recessions: what can leading indicators tell us?
AbstractIt is widely suggested that there is some relationship between banking crises and recessions. We assess whether there is evidence for interdependency between recessions and banking crises using both non-parametric tests and unconditional bivariate probit models and find strong evidence for interdependence. We then consider whether leading indicators can help predict banking crises and recessions and if these variables can explain the previously obvserved interdependence. Inclusion of exogenous variables means that the observed interdependence between banking crises and recessions disappears - indicating that the observed interdependence is a result of easily observable common causes rather than unobserved links.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Monetary Policy Committee Unit, Bank of England in its series Discussion Papers with number 33.
Length: 26 pages
Date of creation: 01 Sep 2011
Date of revision:
Contact details of provider:
Postal: Threadneedle Street, London, EC2R 8AH
Phone: +44 (020) 7601 4444
Fax: +44 (020) 7601 5460
Web page: http://www.bankofengland.co.uk/publications/externalmpcpapers/index.htm
More information through EDIRC
Crises; recessions; interdependency; bivariate probit analysis;
Find related papers by JEL classification:
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-01 (All new papers)
- NEP-BAN-2011-11-01 (Banking)
- NEP-CBA-2011-11-01 (Central Banking)
- NEP-MAC-2011-11-01 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andrea Cipollini & George Kapetanios, 2005.
"Forecasting Financial Crises and Contagion in Asia Using Dynamic Factor Analysis,"
538, Queen Mary, University of London, School of Economics and Finance.
- Cipollini, A. & Kapetanios, G., 2009. "Forecasting financial crises and contagion in Asia using dynamic factor analysis," Journal of Empirical Finance, Elsevier, vol. 16(2), pages 188-200, March.
- Andrea Cipollini & George Kapetanios, 2006. "Forecasting Financial Crises and Contagion in Asia using Dynamic Factor Analysis," Computing in Economics and Finance 2006 477, Society for Computational Economics.
- Andrea Cipollini & George Kapetanios, 2008. "Forecasting Financial Crises and Contagion in Asia using Dynamic Factor Analysis," Center for Economic Research (RECent) 014, University of Modena and Reggio E., Dept. of Economics.
- John H. Boyd & Pedro Gomis & Sungkyu Kwak & Bruce D. Smith, 2000.
"A User's Guide to Banking Crises,"
Monash Economics Working Papers
archive-36, Monash University, Department of Economics.
- Moritz Schularick & Alan M. Taylor, 2012.
"Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870-2008,"
American Economic Review,
American Economic Association, vol. 102(2), pages 1029-61, April.
- Schularick, Moritz & Taylor, Alan M., 2009. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870-2008," CEPR Discussion Papers 7570, C.E.P.R. Discussion Papers.
- Moritz Schularick & Alan M. Taylor, 2009. "Credit Booms Gone Bust: Monetary Policy, Leverage Cycles and Financial Crises, 1870–2008," NBER Working Papers 15512, National Bureau of Economic Research, Inc.
- Elisabetta Falcetti & Merxe Tudela, 2008. "What do Twins Share? A Joint Probit Estimation of Banking and Currency Crises," Economica, London School of Economics and Political Science, vol. 75(298), pages 199-221, 05.
- Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 5-32.
- Ray Barrell & E Philip Davis & Tatiana Fic & Dawn Holland & Simon Kirby & Iana Liadze, 2009. "Optimal Regulation of Bank Capital and Liquidity: How to Calibrate New International Standards," Occasional Papers 38, Financial Services Authority.
- Nicholas Oulton & María Sebastiá-Barriel, 2013.
"Long and Short-Term Effects of the Financial Crisis on Labour Productivity, Capital and Output,"
CEP Discussion Papers
dp1185, Centre for Economic Performance, LSE.
- Oulton, Nicholas & Sebastia-Barriel, Maria, 2013. "Long and short-term effects of the financial crisis on labour productivity, capital and output," Bank of England working papers 470, Bank of England.
- Nicholas Oulton, 2013. "Medium and Long Run Prospects for UK Growth in the Aftermath of the Financial Crisis," CEP Occasional Papers 37, Centre for Economic Performance, LSE.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (William Naughton) The email address of this maintainer does not seem to be valid anymore. Please ask William Naughton to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.