 Are systemic banking crises in developed and developing countries predictable?Journal of Multinational Financial Management, 2016, vol. 37-38, 114-138 Abstract: This paper contributes to the empirical literature on early warning systems of banking crises using a new methodology accounting for model uncertainty. We introduce new variables measuring exposure and connectivity of the domestic banking sector to international financial markets. We show that a multinomial logit model based on Bayesian Model Averaging is favored to conventional multinomial and binary models highlighting what is called by Bussiere and Fratzsher (2006) “post-crisis bias”. We show that the application of the multinomial logit model, which distinguishes between more than two states and uses Bayesian Model Averaging, is a valid way to solve this problem and leads to a substantial improvement in the ability to predict banking crises. The empirical results show that for a set of 49 developing and developed countries, the model would have correctly predicted the vast majority of crises. Keywords: Banking crises; Bayesian model averaging; Early warning system; Crisis prediction; Financial exposure; Developed and developing economies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:37-38:y:2016:i::p:114-138 DOI: 10.1016/j.mulfin.2016.09.002 Access Statistics for this article Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth More articles in Journal of Multinational Financial Management from Elsevier |
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