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The risk of financial crises: Is it in real or financial factors?

Author

Listed:
  • Karolin Kirschenmann

    (Aalto University School of Business, Helsinki, Finland)

  • Tuomas Malinen

    (Helsinki Center of Economic Research, University of Helsinki, Finland)

  • Henri Nyberg

    (Helsinki Center of Economic Research, University of Helsinki, Finland)

Abstract

Are macroeconomic factors such as income inequality the real root causes of financial crises? We explore a variety of financial and macroeconomic variables to find the most reliable predictors for financial crises in 14 developed countries over a period of more than 100 years. Our results, based on a general-to-specific model selection process, indicate that the power to predict financial crises is distributed among several predictors, including income inequality and growth of bank credit. This is in line with the argument that the best predictive factors tend to vary in time.

Suggested Citation

  • Karolin Kirschenmann & Tuomas Malinen & Henri Nyberg, 2014. "The risk of financial crises: Is it in real or financial factors?," Working Papers 336, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2014-336
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2014-336.pdf
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    Cited by:

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    2. Mark Setterfield & Yun K Kim, 2020. "Varieties of capitalism, increasing income inequality and the sustainability of long-run growth," Cambridge Journal of Economics, Oxford University Press, vol. 44(3), pages 559-582.

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    More about this item

    Keywords

    bank loans; income inequality; fixed effects logit.;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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