Systemic early warning systems for EU15 based on the 2008 crisis

Savas Papadopoulos (), Pantelis Stavroulias and Thomas Sager
Additional contact information
Savas Papadopoulos: Bank of Greece
Pantelis Stavroulias: Democritus University of Thrace
Thomas Sager: University of Texas

No 202, Working Papers from Bank of Greece

Abstract: Reliable forecasts of an economic crisis well in advance of its onset could permit effective preventative measures to mitigate its consequences. Using the EU15 crisis of 2008 as a template, we develop methodology that can accurately predict the crisis several quarters in advance in each country. The data for our predictions are standard, publicly available macroeconomic and market variables that are preprocessed by moving averages and filtering. The prediction models then utilize the filtered data to distinguish pre-crisis from normal quarters through standard statistical classification methodology plus a proposed new combined method, enhanced by an innovative threshold selection and goodness-of-fit measure. Empirical results are very satisfactory: Country-stratified 14-fold cross validation achieves 92.1% correct classification and 85.7% for both true positive rate and positive predictive value for the EU15 crisis of 2008. Results will be of use to policy makers, investors, and researchers who are interested in estimating the probability of a crisis as much as one and a half years in advance in order to deploy prudential policies.

Keywords: Banking crisis; financial stability; macroprudential policy; classification methods; goodness-of-fit measures (search for similar items in EconPapers)
JEL-codes: C53 E58 G28 (search for similar items in EconPapers)
Pages: 33
Date: 2016-01
New Economics Papers: this item is included in nep-cba, nep-eec, nep-for, nep-mac and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.bankofgreece.gr/BogEkdoseis/Paper2016202.pdf Full Text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:202

Access Statistics for this paper

More papers in Working Papers from Bank of Greece Contact information at EDIRC.
Bibliographic data for series maintained by Anastasios Rizos ().