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Robust Signals for Banking Crises

Author

Listed:
  • Ons Jedidi

    () (CREM-CNRS)

  • Jean Sébastien Pentecote

    () (CREM-CNRS, University of Caen - Low Normandy)

Abstract

We develop an Early Warning System framework for predicting banking crises in 48 countries from 1977 to 2010. We deal with the problem of model uncertainty and omitted variables bias using Bayesian Model Averaging. Consistent with previous findings, GDP and credit growths, financial liberalization and external total debt are decisive in predicting the occurrence of banking crises. By maximizing the relative usefulness, we find an optimal level of type I and II errors. The robustness analysis shows that our results remain broadly stable when using different income groups of countries.

Suggested Citation

  • Ons Jedidi & Jean Sébastien Pentecote, 2015. "Robust Signals for Banking Crises," Economics Bulletin, AccessEcon, vol. 35(3), pages 1617-1629.
  • Handle: RePEc:ebl:ecbull:eb-14-00716
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Bayesian Model Averaging; Banking Crises; Early Warning Indicators; Forecasting.;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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