Signals from housing and lending booms

Irina Bunda () and Ca’ Zorzi, Michele ()
Additional contact information
Ca’ Zorzi, Michele: European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany., http://www.ecb.europa.eu/home/html/index.en.html

No 1094, Working Paper Series from European Central Bank

Abstract: The contribution of this paper is to revisit the Early Warning System (EWS) literature by analysing selected episodes of financial market crisis, i.e. those preceded by a spell of credit and real estate expansions. The aim is to disentangle instances when this constitutes a natural phenomenon associated with a process of financial development and innovation from those where it constitutes a worrisome signal. We identify economic variables that have leading indicator properties, thus helping to distinguish between “benign” episodes from those likely ending with downward pressures on the exchange rate or even a fully-fledged banking crisis. We find that a large current account deficit, a fall in price competitiveness, strong real growth and high public debt-to-GDP ratio increase the probability that a lending or housing boom would be accompanied by financial market tensions shortly after the peak. JEL Classification: E32, F31, F37.

Keywords: Early warning system; financial crises; house prices; credit booms. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac, nep-mic, nep-rmg and nep-ure
Date: 2009-09
View list of references

Downloads: (external link)
http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1094.pdf (application/pdf)

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: http://EconPapers.repec.org/RePEc:ecb:ecbwps:20091094

Ordering information: This working paper can be ordered from
Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank
Address: Postfach 16 03 19, Frankfurt am Main, Germany
Contact information at EDIRC.
Series data maintained by Official Publications ().