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Multivariate Dynamic Probit Models: An Application to Financial Crises Mutation

  • Elena-Ivona Dumitrescu

    ()

    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

  • Bertrand Candelon

    (Economics - Maastricht University)

  • Christophe Hurlin

    ()

    (LEO - Laboratoire d'économie d'Orleans - CNRS : UMR6221 - Université d'Orléans)

  • Franz C. Palm

    (Maastricht University - univ. Maastricht)

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 Working Papers with number halshs-00630036.

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Date of creation: 28 Jun 2012
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Handle: RePEc:hal:wpaper:halshs-00630036
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00630036
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  1. Don Harding & Adrian Pagan, 2011. "An Econometric Analysis of Some Models for Constructed Binary Time Series," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 29(1), pages 86-95, January.
  2. Kumar, Mohan & Moorthy, Uma & Perraudin, William, 2003. "Predicting emerging market currency crashes," Journal of Empirical Finance, Elsevier, vol. 10(4), pages 427-454, September.
  3. Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Bussière, Matthieu, 2007. "Balance of payment crises in emerging markets: how early were the “early” warning signals?," Working Paper Series 0713, European Central Bank.
  5. repec:cup:cbooks:9780521068710 is not listed on IDEAS
  6. von Hagen, Jürgen & Ho, Tai-kuang, 2004. "Money market pressure and the determinants of baning crises," ZEI Working Papers B 20-2004, ZEI - Center for European Integration Studies, University of Bonn.
  7. Bertrand Candelon & Elena-Ivona DUMITRESCU & Christophe HURLIN, 2010. "Currency Crises Early Warning Systems: why they should be Dynamic," Working Papers 399, Orleans Economic Laboratorys, University of Orleans.
  8. 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.
  9. Michael J. Dueker, 2003. "Dynamic forecasts of qualitative variables: a Qual VAR model of U.S. recessions," Working Papers 2001-012, Federal Reserve Bank of St. Louis.
  10. Hashem Pesaran & Andreas Pick, 2004. "Econometric Issues in the Analysis of Contagion," Money Macro and Finance (MMF) Research Group Conference 2004 67, Money Macro and Finance Research Group.
  11. 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.
  12. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises; A New Database," IMF Working Papers 08/224, International Monetary Fund.
  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. 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.
  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. Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-84, December.
  17. Bertrand Candelon & Franz Palm, 2010. "Banking and Debt Crisis in Europe: The Dangerous Liaisons?," CESifo Working Paper Series 3001, CESifo Group Munich.
  18. Bertrand Candelon & Elena-Ivona Dumitrescu & Christophe Hurlin, 2012. "How to evaluate an Early Warning System ?," Working Papers halshs-00450050, HAL.
  19. 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.
  20. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973, April.
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