IDEAS home Printed from https://ideas.repec.org/a/cii/cepiie/2013-q3-4-135-136-5.html
   My bibliography  Save this article

Banking soundness and financial crises' predictability: a case study of Turkey

Author

Listed:
  • Wajih Khallouli
  • Mahmoud Sami Nab

Abstract

This paper develops an Early Warning System (EWS) based on third-generation mechanism of financial crises using the Markov switching model and a new twin-crisis index. We apply the EWS to Turkey using monthly data ranging between February 1992 and December 2007.We show that the mode captures the two major Turkish financial crises of April 1994 and November 2000/February 2001, and identifies the second one as a twin-crisis. Besides, the model reveals that the financial vulnerability of the Turkish banking system is significant in explaining the triggering of the two financial crises. Furthermore, we show that higher share of banks' assets receivable from the public sector and the interest rate mismatch have the best predictability ability of the twin-crisis over the horizon of 1month.

Suggested Citation

  • Wajih Khallouli & Mahmoud Sami Nab, 2013. "Banking soundness and financial crises' predictability: a case study of Turkey," International Economics, CEPII research center, issue 135-136, pages 62-78.
    • Handle: RePEc:cii:cepiie:2013-q3-4-135-136-5
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/journal/21107017/135
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mirjana Jemović & Srđan Marinković, 2021. "Determinants of financial crises—An early warning system based on panel logit regression," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 103-117, January.
    2. Hossein Dastkhan, 2021. "Network‐based early warning system to predict financial crisis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 594-616, January.
    3. Mekki Hamdaoui & SaifEddine Ayouni & Samir Maktouf, 2022. "Financial crises: explanation, prediction, and interdependence," SN Business & Economics, Springer, vol. 2(8), pages 1-52, August.
    4. Sayyed Mahdi Ziaei, 2017. "Effects of Financial Soundness and Openness on Financial Development," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(04), pages 1-14, December.
    5. Brahim Gaies & Mahmoud‐Sami Nabi, 2021. "Banking crises and economic growth in developing countries: Why privileging foreign direct investment over external debt?," Bulletin of Economic Research, Wiley Blackwell, vol. 73(4), pages 736-761, October.

    More about this item

    Keywords

    Financial crises; Markov switching regime; Early warning system;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G01 - Financial Economics - - General - - - Financial Crises

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cii:cepiie:2013-q3-4-135-136-5. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cepiifr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.