Monitoring Banking Sector Fragility: A Multivariate Logit Approach

Asli Demirguc-Kunt and Enrica Detragiache ()

The World Bank Economic Review, 2000, vol. 14, issue 2, 287-307

Abstract: This article explores how a multivariate logit model of the probability of a banking crisis can be used to monitor banking sector fragility. The proposed approach relies on readily available data, and the fragility assessment has a clear interpretation based on in-sample statistics. The model has better in-sample performance than currently available alternatives, and the monitoring system can be tailored to fit the preferences of decisionmakers regarding type I and type II errors. The framework can be useful as a preliminary screen to economize on precautionary costs. Copyright 2000 by Oxford University Press.

Date: 2000
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Working Paper: Monitoring Banking Sector Fragility: A Multivariate Logit Approach (1999)
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