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The determinants of Asian banking crises—Application of the panel threshold logit model

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  • Chung‐Hua Shen
  • Hsing‐Hua Hsu

Abstract

Considering binary dependent variable, this study extends the panel threshold model into “panel threshold logit model (PTLM).” Our PTLM is applied on investigating the effect of early warning indicators on banking crises in 10 Asian economies. The ratio of short‐term debt to foreign reserves serves as the threshold variable. Results confirm the existence of the threshold effect in the determinants of banking crises, and most of the early warning indicators perform differently in the two debt regimes. Our empirical results suggest that important information may be missed in analyzing crises when conventional logit model is used.

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  • Chung‐Hua Shen & Hsing‐Hua Hsu, 2022. "The determinants of Asian banking crises—Application of the panel threshold logit model," International Review of Finance, International Review of Finance Ltd., vol. 22(1), pages 248-277, March.
    • Handle: RePEc:bla:irvfin:v:22:y:2022:i:1:p:248-277
    DOI: 10.1111/irfi.12354
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