Leading indicators of crisis incidence: Evidence from developed countries

Jan Babecký, Tomas Havranek, Jakub Matějů, Marek Rusnák, Katerina Smidkova and Bořek Vašíček ()

Journal of International Money and Finance, 2013, vol. 35, issue C, 1-19

Abstract: We examine which indicators are most useful in explaining the cost of economic crises in EU and OECD countries between 1970 and 2010. To define the dependent variable we combine a measure of costs to the economy, which consists of the output and employment loss and the fiscal deficit, with a database of crisis occurrence designed specifically for this task. We take into account model uncertainty in two steps. First, for each potential leading indicator we select the relevant prediction horizon by using panel vector autoregression. Second, we identify the most useful leading indicators with Bayesian model averaging. Our results suggest that domestic housing prices, share prices, and credit growth, and some global variables, such as private credit, constitute important sources of risk.

Keywords: Early warning indicators; Bayesian model averaging; Panel VAR; Dynamic panel; Crises (search for similar items in EconPapers)
JEL-codes: C33 E44 E58 F47 G01 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (104)

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Working Paper: Leading indicators of crisis incidence: evidence from developed countries (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:35:y:2013:i:c:p:1-19

DOI: 10.1016/j.jimonfin.2013.01.001

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