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Forecasting banking crises with dynamic panel probit models

António Antunes (), Diana Bonfim (), Nuno Monteiro and Paulo Rodrigues ()

International Journal of Forecasting, 2018, vol. 34, issue 2, 249-275

Abstract: Banking crises are rare events, but when they occur, their consequences are often dramatic. The aim of this paper is to contribute to the toolkit of early warning models that is available to policy makers by exploring the dynamics and exuberances embedded in a panel dataset that covers 22 European countries over four decades (from 1970Q1 to 2012Q4). The in- and out-of-sample forecast performances of several (dynamic) probit models are evaluated, with the objective of developing common vulnerability indicators with early warning properties. The results obtained show that adding dynamic components and exuberance indicators to the models improves the performances of early warning models significantly.

Keywords: Banking crisis; Binary data; Dynamic probit models; Early warning indicators (search for similar items in EconPapers)
Date: 2018
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Working Paper: Forecasting banking crises with dynamic panel probit models (2016) Downloads
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DOI: 10.1016/j.ijforecast.2017.12.003

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Handle: RePEc:eee:intfor:v:34:y:2018:i:2:p:249-275