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Early Warning Indicators for the German Banking System: A Macroprudential Analysis

  • Thomas Kick

    ()

    (Deutsche Bundesbank, Zentralbereich Banken und Aufsicht, Wilhelm-Epstein-Straße 14, 60431 Frankfurt)

  • Nadya Jahn

    ()

    (Finance Center Münster, Institut für Kreditwesen, Universität Münster, Universitätsstraße 14–16, 48143 Münster)

In this paper, we introduce a continuous and forward-looking stability indicator for the banking system based on information on all financial institutions in Germany between 1995 and 2010. Explaining this indicator by means of panel regression techniques, we identify significant macroprudential early warning indicators (such as asset price indicators, leading indicators for the business cycle and monetary indicators) and spillover effects. International spillovers play a significant role across all banking sectors, whereas regional spillovers and the credit-to- GDP ratio are more important for cooperative banks and less relevant for commercial banks.

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Article provided by Credit and Capital Markets in its journal Credit and Capital Markets.

Volume (Year): 47 (2014)
Issue (Month): 1 ()
Pages: 5–47

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Handle: RePEc:kuk:journl:v:47:y:2014:i:1:p:5-47
Contact details of provider: Web page: http://www.credit-and-capital-markets.de/

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  1. Miguel A. Segoviano & Charles Goodhart, 2009. "Banking stability measures," LSE Research Online Documents on Economics 24416, London School of Economics and Political Science, LSE Library.
  2. Illing, Mark & Liu, Ying, 2006. "Measuring financial stress in a developed country: An application to Canada," Journal of Financial Stability, Elsevier, vol. 2(3), pages 243-265, October.
  3. Bekaert, Geert & Hoerova, Marie & Lo Duca, Marco, 2013. "Risk, uncertainty and monetary policy," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 771-788.
  4. Demirguc-Kunt, Asli & Detragiache, Enrica, 2005. "Cross-country empirical studies of systemic bank distress : a survey," Policy Research Working Paper Series 3719, The World Bank.
  5. Kick, Thomas & Koetter, Michael, 2007. "Slippery slopes of stress: Ordered failure events in German banking," Journal of Financial Stability, Elsevier, vol. 3(2), pages 132-148, July.
  6. Ho, Tai-Kuang & von Hagen, Jürgen, 2004. "Money Market Pressure and the Determinants of Banking Crises," CEPR Discussion Papers 4651, C.E.P.R. Discussion Papers.
  7. Behr, Andreas & Kamp, Andreas & Memmel, Christoph & Pfingsten, Andreas, 2007. "Diversification and the banks' risk-return-characteristics: evidence from loan portfolios of German banks," Discussion Paper Series 2: Banking and Financial Studies 2007,05, Deutsche Bundesbank, Research Centre.
  8. Stefano Puddu, 2013. "Optimal Weights and Stress Banking Indexes," IRENE Working Papers 13-02, IRENE Institute of Economic Research.
  9. Koetter, Michael & Poghosyan, Tigran, 2008. "Real estate markets and bank distress," Discussion Paper Series 2: Banking and Financial Studies 2008,18, Deutsche Bundesbank, Research Centre.
  10. Miroslav Misina & Greg Tkacz, 2008. "Credit, Asset Prices, and Financial Stress in Canada," Staff Working Papers 08-10, Bank of Canada.
  11. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
  12. Fichtner, Ferdinand & Rüffer, Rasmus & Schnatz, Bernd, 2009. "Leading indicators in a globalised world," Working Paper Series 1125, European Central Bank.
  13. Elke Hanschel & Pierre Monnin, 2005. "Measuring and forecasting stress in the banking sector: evidence from Switzerland," BIS Papers chapters, in: Bank for International Settlements (ed.), Investigating the relationship between the financial and real economy, volume 22, pages 431-49 Bank for International Settlements.
  14. De Graeve, F. & Kick, T. & Koetter, M., 2008. "Monetary policy and financial (in)stability: An integrated micro-macro approach," Journal of Financial Stability, Elsevier, vol. 4(3), pages 205-231, September.
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