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How Useful are Regime-Switching Models in Banking Crises Identification?

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  • Tai-kuang Ho

Abstract

We employ a regime-switching approach to the identification of banking crises. This approach reduces the arbitrariness in crisis identification by endogenizing the choices of crisis threshold and crisis duration. Using a sample of 47 countries, we show that this approach also subject to several same problems as the common procedures. The method is sample-dependent, tends to invent much more crises, and is less robust to different model specifications. We conclude that a bind application of regime switching model to crisis identification is questionable

Suggested Citation

  • Tai-kuang Ho, 2004. "How Useful are Regime-Switching Models in Banking Crises Identification?," Econometric Society 2004 Far Eastern Meetings 764, Econometric Society.
  • Handle: RePEc:ecm:feam04:764
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    File URL: http://repec.org/esFEAM04/up.23393.1081315880.pdf
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    Cited by:

    1. Tchana Tchana, Fulbert, 2014. "The empirics of banking regulation," Emerging Markets Review, Elsevier, vol. 19(C), pages 49-76.
    2. Jutasompakorn, Pearpilai & Brooks, Robert & Brown, Christine & Treepongkaruna, Sirimon, 2014. "Banking crises: Identifying dates and determinants," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 32(C), pages 150-166.
    3. Milan Šimáček, 2012. "Indexy finančního stresu pro Českou republiku a Maďarsko
      [Financial Stress Indexes for the Czech Republic and Hungary]
      ," Politická ekonomie, University of Economics, Prague, vol. 2012(5), pages 614-634.

    More about this item

    Keywords

    Markov-switching model; choice of crisis threshold; banking crises identification;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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