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Early warning indicators for the German banking system: A macroprudential analysis

  • Jahn, Nadya
  • Kick, Thomas

Over the past two decades, Germany experienced several periods of banking system instability rather than full-blown banking system crises. 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 measure 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. Whereas international spillovers play a significant role across all banking sectors, regional spillovers and the credit-to-GDP ratio are more important for cooperative banks and less relevant for commercial banks.

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File URL: https://econstor.eu/bitstream/10419/65859/1/729175642.pdf
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Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Papers with number 27/2012.

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Date of creation: 2012
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Handle: RePEc:zbw:bubdps:272012
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  1. Geert Bekaert & Marie Hoerova & Marco Lo Duca, 2010. "Risk, Uncertainty and Monetary Policy," NBER Working Papers 16397, National Bureau of Economic Research, Inc.
  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. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. Miroslav Misina & Greg Tkacz, 2008. "Credit, Asset Prices, and Financial Stress in Canada," Staff Working Papers 08-10, Bank of Canada.
  10. 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.
  11. Fichtner, Ferdinand & Rüffer, Rasmus & Schnatz, Bernd, 2009. "Leading indicators in a globalised world," Working Paper Series 1125, European Central Bank.
  12. Asli Demirgüç-Kunt & Enrica Detragiache, 2005. "Cross-Country Empirical Studies of Systemic Bank Distress; A Survey," IMF Working Papers 05/96, International Monetary Fund.
  13. 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.
  14. Stefano Puddu, 2013. "Optimal Weights and Stress Banking Indexes," IRENE Working Papers 13-02, IRENE Institute of Economic Research.
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