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Multivariate Dynamic Probit Models: An Application to Financial Crises Mutation

Listed author(s):
  • Bertrand Candelon
  • Elena Ivona Dumitrescu

    ()

    (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Christophe Hurlin
  • Franz Palm

In this paper we propose a multivariate dynamic probit model. Our model can be considered as a non-linear VAR model for the latent variables associated with correlated binary time-series data. To estimate it, we implement an exact maximum-likelihood approach, hence providing a solution to the problem generally encountered in the formulation of multivariate probit models. Our framework allows us to apprehend dynamics and causality in several ways. Furthermore, we propose an impulse-response analysis for such models. An empirical application on three nancial crises is nally proposed.

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Paper provided by HAL in its series Post-Print with number hal-01449943.

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Date of creation: 2013
Publication status: Published in Advances in Econometrics, Emerald Group Publishing, 2013, 32, pp.395 - 427
Handle: RePEc:hal:journl:hal-01449943
Note: View the original document on HAL open archive server: https://hal-univ-paris10.archives-ouvertes.fr/hal-01449943
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. Harding, Don & Pagan, Adrian, 2011. "An Econometric Analysis of Some Models for Constructed Binary Time Series," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 86-95.
  2. Jürgen Von Hagen & Tai-Kuang Ho, 2007. "Money Market Pressure and the Determinants of Banking Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1037-1066, August.
  3. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-484, December.
  4. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
  5. Kumar, Mohan & Moorthy, Uma & Perraudin, William, 2003. "Predicting emerging market currency crashes," Journal of Empirical Finance, Elsevier, vol. 10(4), pages 427-454, September.
  6. Lestano & Jacobs, Jan P.A.M., 2004. "A comparison of currency crisis dating methods: East Asia 1970-2002," CCSO Working Papers 200412, University of Groningen, CCSO Centre for Economic Research.
  7. Lestano & Jacobs, Jan & Kuper, Gerard H., 2003. "Indicators of financial crises do work! : an early-warning system for six Asian countries," CCSO Working Papers 200313, University of Groningen, CCSO Centre for Economic Research.
  8. Candelon, Bertrand & Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2014. "Currency crisis early warning systems: Why they should be dynamic," International Journal of Forecasting, Elsevier, vol. 30(4), pages 1016-1029.
  9. Matthieu Bussière, 2013. "Balance of payment crises in emerging markets: how early were the ‘early’ warning signals?," Applied Economics, Taylor & Francis Journals, vol. 45(12), pages 1601-1623, April.
  10. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
  11. Michael Dueker, 2005. "Dynamic Forecasts of Qualitative Variables: A Qual VAR Model of U.S. Recessions," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 96-104, January.
  12. Pesaran, M. Hashem & Pick, Andreas, 2007. "Econometric issues in the analysis of contagion," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1245-1277, April.
  13. Andrea Pescatori & Amadou N R Sy, 2007. "Are Debt Crises Adequately Defined?," IMF Staff Papers, Palgrave Macmillan, vol. 54(2), pages 306-337, June.
  14. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
  15. van den Berg, Jeroen & Candelon, Bertrand & Urbain, Jean-Pierre, 2008. "A cautious note on the use of panel models to predict financial crises," Economics Letters, Elsevier, vol. 101(1), pages 80-83, October.
  16. Bertrand Candelon & Franz Palm, 2010. "Banking and Debt Crises in Europe: The Dangerous Liaisons?," De Economist, Springer, vol. 158(1), pages 81-99, April.
  17. Bertrand Candelon & Elena-Ivona Dumitrescu & Christophe Hurlin, 2012. "How to evaluate an Early Warning System ?," Working Papers halshs-00450050, HAL.
  18. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
  19. Luis Ignacio Jácome, 2004. "The Late 1990's Financial Crisis in Ecuador; Institutional Weaknesses, Fiscal Rigidities, and Financial Dollarization At Work," IMF Working Papers 04/12, International Monetary Fund.
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